Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 4 years ago. The bond currently sells for 81 percent of its face value. The book value of the debt issue is $15 million. The company's tax rate is 33 percent.
In addition, the company has a second debt issue on the market, a zero coupon bond with 4 years left to maturity; the book value of this issue is $78 million and the bonds sell for 77 percent of par.
Required:
(a) What is the company's total book value of debt? (Do not round your intermediate calculations.)
74,100,000
111,120,000
93,000,000
111,900,000
72,210,000
(b) What is the company's total market value of debt? (Do not round your intermediate calculations.)
75,098,400
93,000,000
68,599,500
72,210,000
75,820,500
(c) What is your best estimate of the aftertax cost of debt? (Do not round your intermediate calculations.)
4.7%
5.35%
4.47%
3.51%
5.09%