Estimate of the aftertax cost of debt

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Jiminy’s Cricket Farm issued a 18-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. Suppose the book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 51 percent of par.

What is your best estimate of the aftertax cost of debt? (Round your answer to 2 decimal places. (e.g., 32.16)) Cost of debt %

Reference no: EM131178089

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Estimate of the aftertax cost of debt : Jiminy’s Cricket Farm issued a 18-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. Suppose the book value of the debt issue is $45 million. What is your bes..

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