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Lowells Inc plans to issue a $1,000 par value, 20-year noncallable bond at a yield of 5%. The company's marginal tax rate is 20.00%, but
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Lowells Inc plans to issue a $1,000 par value, 20-year noncallable bond at a yield of 5%. The company's marginal tax rate is 20.00%, but Congress is considering a change in the corporate tax rate to 30.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?
0.5%
-0.5%
0.6%
-0.6%
Lowells Inc plans to issue a $1,000 par value, 20-year noncallable bond at a yield of 5%. The company's marginal tax rate is 20.00%, but Congress is considering a change in the corporate tax rate to 30.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?
| 0.5% | ||
| -0.5% | ||
| 0.6% | ||
| -0.6% |
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