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Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $875, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? Do not round your immediate calculations.
a. 4.58%
b. 4.97%
c. 3.78%
d. 4.92%
e. 5.87%
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