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A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 25 years...

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Finance

A company's 7% coupon rate, semiannual payment, $1,000 par valuebond that matures in 25 years sells at a price of $747.72. Thecompany's federal-plus-state tax rate is 40%. What is the firm'safter-tax component cost of debt for purposes of calculating theWACC? (Hint: Base your answer on the nominal rate.) Roundyour answer to two decimal places.

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Firms aftertax component cost of debt for purposes of calculating the WACC The Aftertax Cost of Debt is the aftertax Yield to maturity of the Bond The Yield to maturity of YTM of the    See Answer
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Transcribed Image Text

A company's 7% coupon rate, semiannual payment, $1,000 par valuebond that matures in 25 years sells at a price of $747.72. Thecompany's federal-plus-state tax rate is 40%. What is the firm'safter-tax component cost of debt for purposes of calculating theWACC? (Hint: Base your answer on the nominal rate.) Roundyour answer to two decimal places.

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