For the firm in the previous problem, suppose the book value of the debt issue is $65
Question:
For the firm in the previous problem, suppose the book value of the debt issue is $65 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $50 million and the bonds sell for 67 percent of par. What is the company’s total book value of debt? The total market value? What is your best estimate of the aftertax cost of debt now?
Data from Previous Problem
Marysa Corp. issued a 30-year, 5.8 percent semiannual bond seven years ago. The bond currently sells for 97 percent of its face value. The company’s tax rate is 21 percent.
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Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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