Mark corp issued a bond with a maturity of 25 years and a, Ask an Expert

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Mark Corp. issued a bond with a maturity of 25 years and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The book value of the debt issue is $40 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $45 million and the bonds sell for 53 percent of par. The company’s tax rate is 38 percent. a) What is the company’s total book value of debt? b) What is the company’s total market value of debt? c) What is your best estimate of the aftertax cost of debt?

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