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Jiminy’s cricket farm 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. 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.)

Respuesta :

The company’s total book value of debt is $135,000,000 and  the company’s total market value of debt is :$115,150,000.

Total book value of debt and Total market value of debt

a. Book value of debts

Book value of debts=Book value of debt issue+Book value of this issue

Book value of debts= $95,000,000 + $40,000,000

Book value of debtsB =$135,000,000

b. Total market value of debt

Total market value of debt=[(.93)($95,000,000) + (.67)($40,000,000)]

Total market value of debt= $88,350,000+$26,800,000

Total market value of debt= $115,150,000

Therefore the company’s total book value of debt is $135,000,000 and  the company’s total market value of debt is :$115,150,000.

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