# Component cost of debt

14. 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 $850, 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?

7.22%

5.95%

6.68%

5.08%

8.22%

https://brainmass.com/business/weighted-average-cost-of-capital/component-cost-of-debt-311076

#### Solution Summary

The solution explains how to calculate the component cost of debt

$2.19