Suspect Corp. issued a bond with a maturity of 10 years and a semiannual coupon rate...

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Finance

Suspect Corp. issued a bond with a maturity of 10 years and asemiannual coupon rate of 8 percent 3 years ago. The bond currentlysells for 96 percent of its face value. The book value of the debtissue is $50 million. In addition, the company has a second debtissue on the market, a zero coupon bond with 10 years left tomaturity; the book value of this issue is $30 million and the bondssell for 55 percent of par. The company’s tax rate is 35percent.

(a) What is the company’s total book value of debt? (Do notround intermediate calculations. Enter your answer in dollars, notmillions of dollars, e.g., 1,234,567.)

(b) What is the company’s total market value of debt? (Donot round intermediate calculations. Enter your answer in dollars,not millions of dollars, e.g., 1,234,567.)

(c) What is your best estimate of the aftertax cost of debt?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places, e.g.,32.16.)

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1st Issue of Bonds Face Value 50000000 Market Value 96 50000000 Market Value 48000000 Semiannual Coupon Rate 8 Semiannual Coupon 8 50000000 Semiannual Coupon 4000000 Time to Maturity 7 years Semiannual Period to Maturity 14 Let semiannual YTM be i 48000000 4000000 See Answer

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Suspect Corp. issued a bond with a maturity of 10 years and asemiannual coupon rate of 8 percent 3 years ago. The bond currentlysells for 96 percent of its face value. The book value of the debtissue is $50 million. In addition, the company has a second debtissue on the market, a zero coupon bond with 10 years left tomaturity; the book value of this issue is $30 million and the bondssell for 55 percent of par. The company’s tax rate is 35percent.(a) What is the company’s total book value of debt? (Do notround intermediate calculations. Enter your answer in dollars, notmillions of dollars, e.g., 1,234,567.)(b) What is the company’s total market value of debt? (Donot round intermediate calculations. Enter your answer in dollars,not millions of dollars, e.g., 1,234,567.)(c) What is your best estimate of the aftertax cost of debt?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places, e.g.,32.16.)