Component cost of debt for use in wacc calculation

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Reference no: EM131347204

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 intermediate calculations.

a. 4.58%

b. 4.92%

c. 5.87%

d. 3.78%

e. 4.97%

Reference no: EM131347204

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