Estimate of the aftertax cost of debt

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Jiminy’s Cricket Farm issued a bond with 16 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 91 percent of its face value. The company’s tax rate is 38 percent. The book value of the debt issue is $40 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 $30 million, and the bonds sell for 50 percent of par.

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

Reference no: EM131358389

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