Solving for cost of debt for purposes of calculating WACC
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6 percent coupon rate, semi-annual payment, 1,000 par value bond which matures in 30 yrs sells at 515.16. Tax is 40%. So Far I know T=40% M=1,000 rd(1-T)= 6%(1-.40) = 3.6% Calculator solve I did N=30 PMT=120 (6% of 1,000 x 2) FV= 1,000 PV=-515.16 solve for I/Y you get =23.3345. I know the answer is 7.2% but im not sure what formula to use from here maybe INT (1 -.40)/(1+.036)(1-.40) + 1,000/(1+.036)(1-.40)N= 30 but I am not coming up with 7.2%.
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This solution explains how to solve for a cost of debt for purposes of calculating WACC.
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Since the payment is made semiannually while the 6 percent rate is annual rate,
the payment (per ...
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