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What is best estimate of the after-tax cost of debt

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Pearce's Cricket Farm issued a 18-year, 3% semiannual bond 3 years ago. The bond currently sells for 92% of its face value. The com pany's tax rate is 40%. 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% of par. Assume the par value ofthe bond is $1.000.

Problem 1: What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.)

Problem 2: What is the company's total market value of debt?

Problem 3: What is your best estimate of the after-tax cost of debt?

Reference no: EM132742739

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