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Calculating Cost of Debt. Shanken Corp. issued a 15-year, 10.0 percent semi-annual bond 4 years...

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Finance

Calculating Cost of Debt. Shanken Corp. issued a 15-year, 10.0 percent semi-annual bond 4 years ago. The bond currently sells for 91 percent of its face value. The companys tax rate is 38 percent. 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 11 years left to maturity; the book value of this issue is $90 million and the bonds sell for 51 percent of par. Assume that par value is equal to the book value of the bonds.

What is your best estimate of the after-tax cost of debt in percentage?

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