What is the component cost of debt

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Reference no: EM13939458

A few years ago the Kennette Company sold a $1,000 par value, non callable bond that now has 15 years to maturity and a 5.00% annual coupon that is paid semi annually. The bond currently sells for $920 and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? (Please show your work).

A) 1.74%

B) 2.32%

C) 3.48%

D) 5.81%

E) 6.96%

Reference no: EM13939458

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