Oberon, Incorporated has a $$30$ million $($face value$)8-$year bond issue selling for $97$ percent of par that pays an annual coupon of $8\mathrm{.}30$ percent.

What would be Oberon's before$-$tax component cost of debt?

Note: Round your answer to $2$ decimal places.

Cost of debt

Explanation

Solve $\{$$$970=$$$83\mathrm{.}00[\frac{1-\frac{1}{(1+i_D{)}^8}}{i_D}]+\frac{\text{\$}1,000}{(1+i_D{)}^8}\}$ for $i_D$

Yields $i_D=0\mathrm{.}088388,$ or $8\mathrm{.}84\%.$

$\backslash$table$[[$A$,$B$,$C$,],[1,$Maturity,$8,],[2,$Price,$97\%,$$$29,100,000\mathrm{.}00$