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 $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?
Answer
A. 4.35%
B. 4.58%
C. 4.83%
D. 5.08%
E. 33%