Component cost of debt
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A company's 6%, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $515.16. The company's federal-plus-state tax rate is 40%. What is the firm's component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate)
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The solution explains how to calculate the component cost of debt
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The component cost of debt is the yield to maturity (YTM) on the current bonds since YTM denotes the curret required return of the ...
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