Item$6$

$2\mathrm{.}72$

points

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Jiminy$$s Cricket Farm issued a bond with $30$ years to maturity and a semiannual coupon rate of $5$ percent $6$ years ago. The bond currently sells for $106$ percent of its face value. The company$$s tax rate is $25$ percent. The book value of the debt issue is $$45$ million. In addition, the company has a second debt issue on the market, a zero coupon bond with $10$ years left to maturity; the book value of this issue is $$45$ million, and the bonds sell for $73$ percent of par.

What is your best estimate of the aftertax cost of debt?

multiple choice $3$

$3\mathrm{.}01\%$

$3\mathrm{.}17\%$

$2\mathrm{.}38\%$

$3\mathrm{.}16\%$