Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 4 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $25 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 $84 million and the bonds sell for 79 percent of par.
Required:
(a) What is the company's total book value of debt? (Do not round your intermediate calculations.)
138,200,000
79,800,000
89,610,000
137,360,000
109,000,000
(b) What is the company's total market value of debt? (Do not round your intermediate calculations.)
109,000,000
94,090,500
89,610,000
85,129,500
93,194,400
(c) What is your best estimate of the aftertax cost of debt? (Do not round your intermediate calculations.)
3.2%
4.89%
4.08%
4.29%
4.66%