Magliaro Industries issued a 30-year, 10% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company's tax rate is 38%. Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54% of par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total market value $740000C What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer rounded to 2 decimal places.) Cost of debt %
Magliaro Industries issued a 30-year, 10% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company's tax rate is 38%. Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54% of par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total market value $740000C What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer rounded to 2 decimal places.) Cost of debt %
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 17P
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Magliaro Industries issued a 30-year, 10% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company's tax rate is 38%.
Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54% of par. Assume the par value of the bond is $1,000.
What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.)
Total book value
What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.)
Total market value
$740000C
What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer
rounded to 2 decimal places.)
Cost of debt
%
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