Problem 13-18 Cost of Debt (LO4) Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years, and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 7%. The face value of the issue is $33 million, and the issue sells for 96% of par value. The firm's tax rate is 40%. a. What is the before-tax cost of debt for Olympic? b. What is Olympic's after-tax cost of debt? Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Before-tax cost of debt b. After-tax cost of debt % %
Problem 13-18 Cost of Debt (LO4) Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years, and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 7%. The face value of the issue is $33 million, and the issue sells for 96% of par value. The firm's tax rate is 40%. a. What is the before-tax cost of debt for Olympic? b. What is Olympic's after-tax cost of debt? Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Before-tax cost of debt b. After-tax cost of debt % %
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:Problem 13-18 Cost of Debt (LO4)
Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years,
and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid
annually, and a coupon rate of 7%. The face value of the issue is $33 million, and the issue sells for 96% of par value. The firm's tax rate
is 40%.
a. What is the before-tax cost of debt for Olympic?
b. What is Olympic's after-tax cost of debt?
Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal
places.
a. Before-tax cost of debt
b. After-tax cost of debt
%
%
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