Question: NEED HELP WITH PART D PLS! LO2 6. Calculating Cost of Debt Jiminy's Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago.

NEED HELP WITH PART D PLS!

LO2 6. Calculating Cost of Debt Jiminy's Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The company's tax rate is 22 percent.

a. What is the pretax cost of debt? ANSWER:4.25%

b. What is aftertax cost of debt? ANSWER: 3.31%

c. Which is more relevant, the pretax or the aftertax cost of debt? Why? ANSWER: Aftertax cost of debt is more relevant because it is the true cost of debt to the company.

d. Suppose the book value of the debt issue is $75 million. In addition, the company has a second debt issue, a zero coupon bond with eight years left to maturity; the book value of this issue is $30 million, and it sells for 81 percent of par. What is the total book value of debt? The total market value? What is the aftertax cost of debt now?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

During the audit of the accounts receivable accounts of Solace Enterprises, a provider of car batteries in the southeastern United States, the auditors have received an abnormally high amount of...

Calculating Cost of Debt Jiminys Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The companys tax rate is 22...

7. Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 7% semiannual bond 3 years ago. The bond Page 556 currently sells for 93% of its face value. The company's tax rate is 35%....

3. Award: 12.50 points Problem 14-7 Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 9% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The...

please answer both questions 7. Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30year, 7% semiannual bond 3 years ago. The bonc currently sells for 93% of its face value. The company's...

Problem 14-8 Calculating Cost of Debt (L03) Pearce's Cricket Farm issued a 30-year, 8% semiannual bond 3 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 35%....

Problem 14-8 Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 10% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company's tax rate is 38%....

Problem 14-7 Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 9% semiannual bond 3 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 20%....

Problem 14.7 Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 10% semiannual bond 5 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 30%....

Problem 14-7 Calculating Cost of Debt (LO3) Pearce's Cricket Farm issued a 30-year, 8% semiannual bond 4 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 25%....

Problem 14-7 Calculating Cost of Debt (L03) Pearce's Cricket Farm issued a 30-year, 9% semiannual bond 4 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 30%....

5. Determine the points where the function f (z) = x + iy is differentiable. Find the value of f'(2).

The time that it takes a randomly selected job applicant to perform a certain task has a distribution that can be approximated by a normal distribution with a mean value of 120 seconds and a standard...

Gmail YouTube Maps LIFETIME 2 . [ - / 1 Points ] Find the derivative of the function. h ( x ) = 1 x 7 Show My Work ( Optional ) 3 . [ - / 1 Points ] Find the derivative of the function.

Mike and Iris were flying home from the meeting. The audit committees reaction had not been what they expected. Im glad they understood the situation, Mike said. Id like you to start revising our...

Outdoor Expo provides guided fishing tours. The company charges $300 per person but offers a 20% discount to parties of four or more. Consider the following transactions during the month of May. May...

Refer to the Analytical Chemistry (May 2010) evaluation of a new method of typing blood, Exercise 10.6. Recall that blood drops were applied to the paper and the rate of absorption (called blood...

Use the differential equation approach to find vc(t) for t > 0 in the circuit in Fig P6.9 and plot the response including the time interval just prior to opening the switch. 12 W + 200 F t-0

Use the differential equation approach to find Vc (t) for t>0in the circuit in Fir. P6.1 t=0 3Ke Vcttl

Realiza un cuadro comparativo donde analices y expliques: Las diferencias y semejanzas entre los diferentes tipos de auditora incluyendo la auditoria adminstrativa

Consider your relationship with your oldest friend or with a close family member. Evaluate the ways in which dialectical tensions have manifested themselves in that relationship over the years. Have...

C If you were to create a profile for yourself on a dating site, how carefully would you construct it?

Stages of a Relationship?