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Bond Yeild and After Tax Cost of Debt Answer is: 7.2% (Must show all detailed work and formulas to support answer) Question: A company's 6%

Bond Yeild and After Tax Cost of Debt

Answer is: 7.2% (Must show all detailed work and formulas to support answer)

Question: 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 answer on nominal rate)

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