Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 9 percent, matures in 3 years, has a total face value of $6 million, and is quoted at 108 percent of face value. The second issue has a 7.5 percent coupon, matures in 16 years, has a total face value of $18 million, and is quoted at 97 percent of face value. Both bonds pay interest semiannually. What is the firm's weighted average aftertax cost of debt if the tax rate is 35 percent?
A.
4.78 percent
B.
5.12 percent
C.
5.63 percent
D.
5.95 percent
E.
6.08 percent
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 9 percent, matures in 3 years, has a total face value of $6 million, and is quoted at 108 percent of face value. The second issue has a 7.5 percent coupon, matures in 16 years, has a total face value of $18 million, and is quoted at 97 percent of face value. Both bonds pay interest semiannually. What is the firm's weighted average aftertax cost of debt if the tax rate is 35 percent?
| A. | 4.78 percent |
| B. | 5.12 percent |
| C. | 5.63 percent |
| D. | 5.95 percent |
| E. | 6.08 percent |
Related questions
| Vedder, Inc., has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.2 million, a coupon rate of 7.2 percent, and sells for 97 percent of par. The second issue has a face value of $35.2 million, a coupon rate of 6.7 percent, and sells for 96 percent of par. The first issue matures in 22 years, the second in 14 years. |
| Required: | |
| (a) | What are the company |
