Calculating cost of debt-jiminy cricket farm


Jiminy's Cricket Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells for 95 percent of its face value. The book value of the debt issue is $80 million. The company's tax rate is 35 percent.

In addition, the company has a second debt issue on the market, a zero coupon bond with seven years left to maturity; the book value of this issue is $35 million, and the bonds sell for 61 percent of par.

The company's total book value of debt is $___. Its total market value of debt is $___. (Enter your answers in dollars, not millions of dollars, e.g, $1,234,567.) Your best estimate of the aftertax cost of debt is ___ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places.(e.g., 32.16))

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Finance Basics: Calculating cost of debt-jiminy cricket farm
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