Pearce's Cricket Farm issued a 10-year, 8% semiannual bond 3 years ago. The bond currently sells for 96% of its face value. Thecompany's tax rate is 35%.Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zerocoupon bond with 10 years left to maturity; the book value of this issue is $30 million and the bonds sell for 55% of par. Assume the parvalue of the bond is $1,000.What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.)Total book value$ 8000000What is the company's total market value of debt? (Enter the answer in dollars. Omit $ sign in your response.)Total market value$ 6450000What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentagerounded to 2 decimal places.)Cost of debt

The cost of debt can be found by multiplying the weights of each issue of dent with its specific…

Answered: Pearce's Cricket Farm issued a 10-year,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 17P

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