Calculation for cost of debt

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Reference no: EM132018932

ABC issued a bond three years ago. The bond pays interest of 4.0% ($1,000 x .04 = $40 / 2 = $20 paid every six months). Seven years remain until the bond comes due (matures). A recent analysis shows the bond trading at a discount (below par value). Its current yield to maturity is 6.50%. What number should the CFO put in his WACC calculation for the cost of Debt, assuming ABC pays taxes using a 21% income tax rate?

Reference no: EM132018932

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