Major expansion-what is the component cost of debt

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Reference no: EM13932619

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 semi annually, sells at a price of $1,075, 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?

a. 5.08%

b. 4.58%

c. 5.33%

d. 4.35%

e. 4.83%

Reference no: EM13932619

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