Jiminy's Cricket Farm issued a 25-year, 10 percent semiannual bond 3 years ago. The bond currentlysells for 93 percent of its face value. The book value of the debt issue is $45 million. In addition, thecompany has a second debt issue on the market, a zero coupon bond with 13 years left to maturity;the book value of this issue is $45 million and the bonds sell for 52 percent of par. The company'stax rate is 24 percent.a. What is the company's total book value of debt?Note: Do not round intermediate calculations and enter your answer in dollars, not millionsof dollars, e.g., 1,234,567.b. What is the company's total market value of debt?Note: Do not round intermediate calculations and enter your answer in dollars, not millionsof dollars, e.g., 1,234,567.c. What is your best estimate of the aftertax cost of debt?Note: Do not round intermediate calculations and enter your answer as a percent roundedto 2 decimal places, e.g., 32.16.a. Total book valueb. Total market valuec. Cost of debt%

Book value is the value represented on the balance sheet of the company whereas the market value is…

Answered: iminy's Cricket Farm issued a 25-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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Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
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Jiminy's Cricket Farm issued a 15-year, 5.7 percent semiannual bond 3 years ago. The bond currently sells for 108 percent of its face value. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 52 percent of par. The company’s tax rate is 22 percent. a. What is the company's total book value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the company's total market value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) c. What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jiminy’s Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The book value of the debt issue is $75 million. In addition, the company has a second debt issue on the market, a zero coupon bond with eight years left to maturity; the book value of this issue is $30 million, and the bonds sell for 81 percent of par. The company’s tax rate is 22 percent. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) c. What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 6 percent 5 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 24 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 8 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 79 percent of par. What is the company's total book value of debt? What is the company's total market value of debt? What is your best estimate of the aftertax cost of debt?
A company issued a 30-year, 6 percent semiannual bond three years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $95 million. In addition, the company has a second debt issue on the market, a zero-coupon bond with eight years left to maturity; the book value of this issue is $40 million, and the bonds sell for 67 percent of par. The company’s tax rate is 22 percent. What is the best estimate of the aftertax cost of debt?
Marysa Corp. issued a 15-year, 7 percent semiannual bond 2 years ago. The bond currently sells for 95 percent of its face value. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 15 years left to maturity; the book value of this issue is $35 million and the bonds sell for 54 percent of par. The company’s tax rate is 22 percent. a. What is the company’s total book value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the company’s total market value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) c. What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Total book value:______ b. Total market value:_____ c.…
Jiminy’s Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 5 percent 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 22 percent. The book value of the debt issue is $35 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 8 years left to maturity; the book value of this issue is $20 million, and the bonds sell for 65 percent of par. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) b. What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) c. What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jiminy’s Cricket Farm issued a 30-year, 6 percent semiannual coupon bond 4 years ago. The bond currently sells for 105 percent of its face value. The company’s tax rate is 23 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue, a zero coupon bond with 8 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 67 percent of par. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) b. What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) c. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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