Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 3 years ago.
Question # 00566630
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Updated on: 07/27/2017 04:53 AM Due on: 07/27/2017

Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent. Suppose the book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 57 percent of par.
What is the company’s total book value of debt?
What is the company’s total market value of debt?
What is your best estimate of the aftertax cost of debt?

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Rating:
5/
Solution: Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 3 years ago.