Question: Kindly help me with the calculation of attached solution , particularly YTM of Zero coupon bond : 8. The book value of debt is the

Kindly help me with the calculation of attached solution , particularly YTM of Zero coupon bond :

Kindly help me with the calculation of attached solution , particularly YTM

8. The book value of debt is the total par value of all outstanding debt, so: BVD = $70,000,000 + 50,000,000 = $120,000,000 To nd the market value of debt, we nd the price of the bonds and multiply by the number of bonds. Alternatively, we can multiply the price quote of the bond times the par value of the bonds. Doing so, we nd: MVD = 1.08{$?0,000,000) + .61($50,000,000} MVD = $75,600,000 + 30,500,000 MVD = $106,100,000 The YTM of the zero coupon bonds is: P2 = $610 = $1,000(PVTFR%J) R. '\" 7.32% So, the aertax cost of the zero coupon bonds is: R2 =.0132(1 .35) = .0416 or 4.76% The aftertax cost of debt for the company is the weighted average of the aertax east of debt for all outstanding bond issues. We need to use the market value Weights of the bonds. The total aertax cost of debt for the company is: Rn = 05346756131061) + .04?6($30.5!$106.1} = 1051? or 5.11%

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