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What is the before-tax cost of debt for Olympic

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Reference no: EM132991189

Question - Olympic Sports has two issues of debt outstanding. One is an 8% coupon bond with a face value of $24 million, a maturity of 15 years, and a yield to maturity of 9%. 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 9%. The face value of the issue is $29 million, and the issue sells for 96% of par value. The firm's tax rate is 30%.

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

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

Reference no: EM132991189

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