ZuoTi.Pro
Question

Finance

Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. 

a. What is the pre-taxed cost of debt? 

b. What is the after tax cost of debt? 

c. Which is more relevant, the pre-tax or the after- tax cost of debt? Why? 


In question 3 above, suppose the book value of the debt issues is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years to mature. The book value of this issue is $35 million and the bond sell for 57 percent of par. 


a. What is the company’s total book value of debt?

b. The total market value? 

c. What is your best estimate of the after-tax cost of debt now?

0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Finance
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond...

    Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. a. What is the pre-taxed cost of debt? b. What is the after tax cost of debt? c. Which is more relevant, the pre-tax or the after- tax cost of debt? Why? In question 4 above, suppose the book value of the debt issues is $60 million. In addition,...

  • 4. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The...

    4. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. a. What is the pre-taxed cost of debt? b. What is the after tax cost of debt? c. Which is more relevant, the pre-tax or the after- tax cost of debt? Why? In question 4 above, suppose the book value of the debt issues is $60 million. In...

  • Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond...

    Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. a. What is the pre-taxed cost of debt? b. What is the after tax cost of debt? c. Which is more relevant, the pre-tax or the after- tax cost of debt? Why? In question 4 above, suppose the book value of the debt issues is $60 million. In addition,...

  • 4. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The...

    4. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company's tax rate is 35%. a. What is the pre-taxed cost of debt? b. What is the after tax cost of debt? c. Which is more relevant, the pre-tax or the after-tax cost of debt? Why? In question 4 above, suppose the book value of the debt issues is $60 million. In addition,...

  • Pearce’s Cricket Farm issued a 25-year, 8% semiannual bond 3 years ago. The bond currently sells...

    Pearce’s Cricket Farm issued a 25-year, 8% semiannual bond 3 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 $45 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 $45 million and the bonds sell for 53% of par. Assume the...

  • Pearce’s Cricket Farm issued a 15-year, 8% semiannual bond 3 years ago. The bond currently sells for 96% of its face val...

    Pearce’s Cricket Farm issued a 15-year, 8% semiannual bond 3 years ago. The bond currently sells for 96% of its face value. The company’s tax rate is 35%. Suppose 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 $35 million and the bonds sell for 51% of par. Assume the...

  • accounts

    Pearce’s Cricket Farm issued a 15-year, 6% semiannual bond 2 years ago. The bond currently sells for 95% of its face value. The company’s tax rate is 40%. Suppose 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 51% of par. Assume the par...

  • Pearce’s Cricket Farm issued a 10-year, 8% semiannual bond 3 years ago. The bond currently sells...

    Pearce’s Cricket Farm issued a 10-year, 8% semiannual bond 3 years ago. The bond currently sells for 96% 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 10 years left to maturity; the book value of this issue is $30 million and the bonds sell for 55% of par. Assume the...

  • Jiminy’s Cricket Farm issued a 15-year, 4 percent semiannual coupon bond 2 years ago. The bond...

    Jiminy’s Cricket Farm issued a 15-year, 4 percent semiannual coupon bond 2 years ago. The bond currently sells for 91 percent of its face value. The company’s tax rate is 21 percent. The book value of the debt issue is $30 million. In addition, the company has a second debt issue, a zero coupon bond with 7 years left to maturity; the book value of this issue is $20 million, and the bonds sell for 73 percent of par. a....

  • Pearce’s Cricket Farm issued a 25-year, 6% semiannual bond 2 years ago. The bond currently sells...

    Pearce’s Cricket Farm issued a 25-year, 6% semiannual bond 2 years ago. The bond currently sells for 92% of its face value. The company’s tax rate is 40%. Suppose 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 53% of par. Assume the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT