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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 7% coupon bond with a face value of $37 million, a maturity of 10 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 8%. The face value of the issue is $42 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: EM133156963

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