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Chapter 10 - The Cost of Capital Question MC #73 (Points:

3. Chapter 10 - The Cost of Capital Question MC #73
(Points: 10)
To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $875, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?



1. 5.95%

2. 5.63%

3. 6.47%

4. 5.31%

5. 6.15%
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