Question

In: Finance

Shanken Corp. issued a 20-year, 4.6 percent semiannual bond 4 years ago. The bond currently sells...

Shanken Corp. issued a 20-year, 4.6 percent semiannual bond 4 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity; the book value of this issue is $40 million and the bonds sell for 51 percent of par. The company’s tax rate is 21 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.)

Solutions

Expert Solution


Related Solutions

Shanken Corp. issued a 20-year, 5.1 percent semiannual bond 2 years ago. The bond currently sells...
Shanken Corp. issued a 20-year, 5.1 percent semiannual bond 2 years ago. The bond currently sells for 97 percent of its face value. The book value of the debt issue is $50 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 $40 million and the bonds sell for 52 percent of par. The company’s tax rate is 25 percent....
Shanken Corp. issued a 30-year, 10 percent semiannual bond 4 years ago. The bond currently sells...
Shanken Corp. issued a 30-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 94 percent of its face value. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54 percent of par. The company’s tax rate is 38 percent....
4 Shanken Corp. issued a 25-year, 5.5 percent semiannual bond 4 years ago. The bond currently...
4 Shanken Corp. issued a 25-year, 5.5 percent semiannual bond 4 years ago. The bond currently sells for 106 percent of its face value. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $45 million and the bonds sell for 50 percent of par. The company’s tax rate is 25...
Shanken Corp. issued a 10-year, 6 percent semiannual bond 2 years ago. The bond currently sells...
Shanken Corp. issued a 10-year, 6 percent semiannual bond 2 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 35 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)   Pretax cost of debt % b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as...
Shanken Corp. issued a 25-year, 5.9 percent semiannual bond 2 years ago. The bond currently sells...
Shanken Corp. issued a 25-year, 5.9 percent semiannual bond 2 years ago. The bond currently sells for 110 percent of its face value. The book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $45 million and the bonds sell for 54 percent of par. The company’s tax rate is 24 percent....
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual bond four years ago. The bond currently...
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual bond four years ago. The bond currently sells for 98 percent of its face value. The company’s tax rate is 25 percent. What is the aftertax cost of debt? Select one: A. 7.68% B. 3.61% C. 7.21% D. 5.41% E. 5.89%
Pearce’s Cricket Farm issued a 20-year, 10% semiannual bond 2 years ago. The bond currently sells...
Pearce’s Cricket Farm issued a 20-year, 10% semiannual bond 2 years ago. The bond currently sells for 93% of its face value. The company’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 zero coupon bond with 13 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52% of par. Assume the...
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual coupon bond 4 years ago. The bond...
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual coupon bond 4 years ago. The bond currently sells for 104 percent of its face value. The company’s tax rate is 23 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue, a zero coupon bond with 10 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 58 percent of par. a....
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual coupon bond 4 years ago. The bond...
Jiminy’s Cricket Farm issued a 20-year, 7 percent semiannual coupon bond 4 years ago. The bond currently sells for 104 percent of its face value. The company’s tax rate is 23 percent. a. What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company’s aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a...
Pearce’s Cricket Farm issued a 30-year, 8% semiannual bond 4 years ago. The bond currently sells...
Pearce’s Cricket Farm issued a 30-year, 8% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company’s tax rate is 35%. Assume the par value of the bond is $1,000. a. What is the pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Pre-tax cost of debt             % b. What is the after-tax cost of debt? (Do not round intermediate calculations. Round the final...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT