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 Company’s tax rate is 35%. In question 3 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. a. What is the company’s total book value of debt? b. The total market value? c. What is your best estimate of the after-tax cost of debt now? PLEASE SHOW WORKING CLEARLY
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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 Company’s tax rate is 35%.
In question 3 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.
a. What is the company’s total book value of debt?
b. The total market value?
c. What is your best estimate of the after-tax cost of debt now?
PLEASE SHOW WORKING CLEARLY
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