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After-tax cost of debt to be used in wacc calculation

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The WeLoveBondValuation Company needs to estimate the cost of debt in their WACC calculation. The 10-year bond issue would have $1,000 par value, 5% coupon rate, and pay interest semiannually. The bonds would sell for $884.22 per bond.

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a) What is the cost of debt?

b) If the marginal tax rate of the company is 30%, what is the after-tax cost of debt to be used in the WACC calculation?

Reference no: EM131041503

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