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What is the before-tax cost of debt for Olympic

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Reference no: EM132787954

Question - Olympic sports have two issues of debt outstanding .one is a 9 % coupon bond with a face value of $20 million, a maturity of 10 years, and a yield to maturity of 10%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually and a coupon of 10%. The face value of the issue is $25 million and the issue sells for 92.8% of par value. The firm's tax rate is 30%.

Required -

a. What is the before-tax cost of debt for Olympic?

b. What is the after tax cost of debt?

Reference no: EM132787954

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