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What is the before-tax cost of debt for olympic

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Question - Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $40 million, a maturity of 15 years, and a yield to maturity of 10%. 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 10%. The face value of the issue is $45 million, and the issue sells for 95% of par value. The firm's tax rate is 30%.

Required -

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

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

Reference no: EM133073176

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