Pearce's Cricket Farm issued a 20-year, 10% semiannual bond 2 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 35%. Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52% of par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value $9000000 What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total market value $6730000 What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Cost of debt 5.93 % ما
Pearce's Cricket Farm issued a 20-year, 10% semiannual bond 2 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 35%. Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52% of par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value $9000000 What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total market value $6730000 What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Cost of debt 5.93 % ما
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Pearce's Cricket Farm issued a 20-year, 10% semiannual bond 2 years ago. The bond currently sells for 93% of its face value. The
company's tax rate is 35%.
Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero
coupon bond with 13 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52% of par. Assume the par
value of the bond is $1,000.
What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.)
Total book value
$9000000
What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.)
Total market value
$6730000
What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage
rounded to 2 decimal places.)
Cost of debt
5.93 %
ما
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