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1. Berkshire Hathaway's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have 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 35%, what is the component cost of debt for use in the WACC calculation?
A. 4.35%
B. 4.58%
C. 5.08%
D. 5.51%
2. The maximum growth rate a firm could achieve if it had no access to external capital is known best as: _________.
A. Spontaneous payout growth rate
B. Self-supporting growth rate
C. Full capacity growth rate
D. Hurley growth rate
At what price should the Kumar Corporation sell these bonds?
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