Final answer:
The question seeks to determine the tax rate for Olympic Sports given information about their bond issues. However, the information provided is not sufficient to calculate the tax rate because it does not include details on tax savings or actual after-tax cost of debt. Therefore, we cannot accurately determine the tax rate from the given data.
Step-by-step explanation:
The question posed relates to finding the tax rate of Olympic sports based on the information given about two different bond issues. To solve this problem, we need to understand the concept of the yield to maturity (YTM) of a bond, which is the total return anticipated on a bond if the bond is held until the end of its lifetime. Also, we need to consider the market price of the second bond which is selling at 93% of its par value.
We are given that one bond has 4% coupon rate, a face value of $34 million, a maturity of 15 years, and a YTM of 5%. The second bond has a 5% coupon rate, a face value of $39 million, a maturity of 20 years, and it sells for 93% of par value. The tax rate impacts the cost of debt because interest on debt is tax-deductible, reducing the company's taxable income and thus its tax liability. However, without specific information on the tax savings or the actual cost of debt after taxes, it's not possible to accurately determine the tax rate. As such, we cannot calculate the tax rate solely based on the information given in the question.