(9–9)

Bond Yield and After-

Tax Cost of Debt A company’s 6% coupon rate, 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 after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.)