If the firm’s tax rate is 40%, what is the component cost of debt for use in the WACC calculation?
Question 8 To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid
semiannually, sells at a price of $875, and has a par value of $1,000. If the firm’s tax rate is 40%, what is the component cost of debt for use in the WACC calculation? 5.95% 5.63% 6.47% 6.15% 5.31%