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Circle Inc. plans to issue a $1,000 par value, 20-year bond with a 7.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%,
Circle Inc. plans to issue a $1,000 par value, 20-year bond with a 7.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 25.00%. By how much would the after-tax cost of debt used to calculate the WACC change if the new tax rate was adopted? (Hint: rd stays the same and use the cost at new tax rate minus the cost at old tax rate.)
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