What is the company’s total book value of debt? b. The total market value? c. What is your best estimate of the after-tax cost of debt now?
What is the company’s total book value of debt? b. The total market value? c. What is your best estimate of the after-tax cost of debt now?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. Suppose the book value of the debt issues is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years to mature. The book value of this issue is $35 million and the bond sell for 57 percent of par.
a. What is the company’s total book value of debt?
b. The total market value?
c. What is your best estimate of the after-tax cost of debt now?
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