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Component cost of debt in the WACC calculation

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Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. The bond currently sells for $900.90, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation?

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Solution Summary

The solution explains how to calculate component cost of debt in the WACC calculation in a brief paragraph as well as using a calculation. An Excel file with the solution is also attached.

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The component cost of debt is the after tax YTM on the existing debt. The YTM is the ...

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