Shanken Corp. issued a 30-year, 10 percent semiannual bond 4 years ago. The bond currently sells...

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Shanken Corp. issued a 30-year, 10 percent semiannual bond 4years ago. The bond currently sells for 94 percent of its facevalue. The book value of the debt issue is $50 million. Inaddition, the company has a second debt issue on the market, a zerocoupon bond with 14 years left to maturity; the book value of thisissue is $50 million and the bonds sell for 54 percent of par. Thecompany’s tax rate is 38 percent.
What is the company's total book value of debt? (Do notround intermediate calculations and enter your answer in dollars,not millions of dollars, e.g., 1,234,567.)
  Total book value $
What is the company's total market value of debt? (Donot round intermediate calculations and enter your answer indollars, not millions of dollars, e.g., 1,234,567.)
  Total market value $
What is your best estimate of the aftertax cost of debt?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
  Cost of debt %

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3.8 Ratings (584 Votes)

Total book value BV debt 1 BV debt 2 5050100m 100000000 MV of Bond1Par valuebonds outstandingage of par MV of Bond1100050000094 47000000 MV of Bond2Par See Answer

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Shanken Corp. issued a 30-year, 10 percent semiannual bond 4years ago. The bond currently sells for 94 percent of its facevalue. The book value of the debt issue is $50 million. Inaddition, the company has a second debt issue on the market, a zerocoupon bond with 14 years left to maturity; the book value of thisissue is $50 million and the bonds sell for 54 percent of par. Thecompany’s tax rate is 38 percent.What is the company's total book value of debt? (Do notround intermediate calculations and enter your answer in dollars,not millions of dollars, e.g., 1,234,567.) Total book value$ What is the company's total market value of debt? (Donot round intermediate calculations and enter your answer indollars, not millions of dollars, e.g., 1,234,567.) Total market value$ What is your best estimate of the aftertax cost of debt?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.) Cost of debt%