Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The...
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Accounting
Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Companys tax rate is 35%.
a) What is the pre-taxed cost of debt? Answer
%
b) What is the after tax cost of debt? Answer
%
c) Which is more relevant, the pre-tax or the after- tax cost of debt? Why? Answerafter-taxpre-tax
In the question above, suppose the book value of the debt issues is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years to mature. The book value of this issue is $35 million and the bond sell for 57 percent of par.
- What is the companys total book value of debt? $ Answer
- The total market value? $ Answer
- What is your best estimate of the after-tax cost of debt now? Answer
%
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