Pearce's Cricket Farm issued a 15-year, 10% semiannual bond 4 years ago. The Bohd 2uneny company's tax rate is 38% Suppose the book value of the debt issue is $60 million In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity. the book value of this issue is $35 million and the bonds sel for 5% 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 S sign in your response.) Total book value What is the company's total market value of debr? (Enter the answer in dollars. Omit S sign in your response.) Total market value What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Cost of debt

Pearce's Cricket Farm issued a 15-year, 10% semiannual bond 4 years ago. The Bohd 2uneny company's tax rate is 38% Suppose the book value of the debt issue is $60 million In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity. the book value of this issue is $35 million and the bonds sel for 5% 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 S sign in your response.) Total book value What is the company's total market value of debr? (Enter the answer in dollars. Omit S sign in your response.) Total market value What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Cost of debt

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
OShea Inc. issued bonds at a face value of $100,000, a rate of 6%, and a 5-year term for $98,000. From this information, we know that the market rate of interest was ________. A. more than 6% B. less than 6% C. equal to 6% D. cannot be determined from the information given.
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Diana Inc. issued $100,000 of its 9%, 5-year bonds for $96,149 when the market rate was 10%. The bonds pay interest semi-annually. Prepare an amortization table for the first three payments.
Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for $103,000. From this information, we know that the market rate of interest was ________. A. more than 7% B. less than 7% C. equal to 7% D. equal to 1.3%
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000