Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of...

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Finance

Great Lakes Packing has two bond issues outstanding. The firstissue has a coupon rate of 3.84 percent, a par value of $1,000 perbond, matures in 7 years, has a total face value of $5.3 million,and is quoted at 102 percent of face value. The second issue has acoupon rate of 6.61 percent, a par value of $1,000 per bond,matures in 16 years, has a total face value of $9.6 million, and isquoted at 105 percent of face value. Both bonds pay interestsemiannually. The company's tax rate is 39 percent. What is thefirm's weighted average aftertax cost of debt?
3.06%
2.94%
3.17%
5.21%
4.19%

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4.5 Ratings (867 Votes)

MV of Bond 1Par valuebonds outstandingage of par MV of Bond 110005300102 5406000 MV of Bond2Par valuebonds outstandingage of par MV of See Answer

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Great Lakes Packing has two bond issues outstanding. The firstissue has a coupon rate of 3.84 percent, a par value of $1,000 perbond, matures in 7 years, has a total face value of $5.3 million,and is quoted at 102 percent of face value. The second issue has acoupon rate of 6.61 percent, a par value of $1,000 per bond,matures in 16 years, has a total face value of $9.6 million, and isquoted at 105 percent of face value. Both bonds pay interestsemiannually. The company's tax rate is 39 percent. What is thefirm's weighted average aftertax cost of debt?3.06%2.94%3.17%5.21%4.19%