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What is olympic after-tax cost of debt

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Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years, and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 7%. The face value of the issue is $33 million, and the issue sells for 96% of par value. The firm's tax rate is 40%.

Problem a. What is the before-tax cost of debt for Olympic?

Problem b. What is Olympic's after-tax cost of debt?

Reference no: EM132767507

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