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Problem 11-9 Bond Yield and After-Tax Cost of Debt A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years

Problem 11-9 Bond Yield and After-Tax Cost of Debt

A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $578.22. 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? Round your answer to two decimal places. (Hint: Base your answer on the nominal rate.)

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