Answer question 7. 2nd picture is question 6.

7. Calculating Cost of Debt For the firm in Problem 6, suppose the book value of the debt issue is $135 million. In addition, the company has a second debt issue, a zero coupon bond with 12 years left to maturity; the book value of this issue is $65 million, and it sells for 64.3 percent of par. What is the total book value of debt? The total market value? What is the aftertax cost of debt now? 6.Information provided: Face value= future value= $1,000 Current value= present value= 110%*1,000= $1,100 Time= 30 years - 8 years = 22*2= 44 semi-annual periods Coupon rate= 6.3%/2= 3.15% Coupon payment=0.032*1,000= $31.50 per semi- annual period The company's pretax cost of debt is calculated by computing the yield to maturity, Enter the below in a financial calculator to compute the yield to maturity: FV= 1,000 N= 44 PV= -1,100 PMT= 31.50 Press the CPT key and I/Y to compute the yield to maturity. The value obtained is 2.7550 Therefore, the company's pretax cost of debt is 2.7550%*2 = 5.5101% b.After tax cost of debt=pretax cost of debt*(1-tax rate) = 5.5101%*(1 - 0.22) = 4.2979%. 4.30%. c.The after-tax cost of debt is more relevant since interest on debt is tax deductible. In case of any query, kindly comment on the solution