Question

Jiminy's Cricket Farm issued a 30-year, 7.2 percent semiannual bond 6 years ago. The bond currently sells for 87.5 percent of its face value. The book value of this debt issue is $103 million. In addition, the company has a second debt issue, a zero coupon bond with 9 years left to maturity; the book value of this issue is $62 million, and it sells for 59 percent of par. The company’s tax rate is 38 percent.

Total book value of debt $
165,000,000


What is the total market value of debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Total market value $
126705000


What is the aftertax cost of the 7.2 percent coupon bond? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Aftertax cost of debt
5.22
%

What is the aftertax cost of the zero coupon bond? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Aftertax cost of debt
3.68
%

What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Aftertax cost of debt
%
I answered all other questions, stuck on the "After tax cost of debt" need help.

Answer 1

Add the tax to the "before tax" to get the answer

Answer 2

Anonymous, I still don't understand.