Calculate the component cost of debt of a firm

Calculate the component cost of debt of a firm

Calculate the component cost of debt To help finance a major expansion, Castro Chemical Corporation sold a noncallable bond several years ago that now has twenty years to maturity. This bond has a 9.25% yearly

• Complete the interactive worksheet 14.1 “estimating retirement needs” from Chapter 14. Be prepared to discuss.

1. 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