Question: A few years ago ValuChain Company sold a $1,000 par value, noncallable bond that now has 15 years to maturity and a 5.00% annual coupon

A few years ago ValuChain Company sold a $1,000 par value, noncallable bond that now has 15 years to maturity and a 5.00% annual coupon that is paid semiannually. The bond currently sells for $920 and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation?

A.) 1.74%

B.) 2.32%

C.) 3.48%

D.) 6.96%

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To determine the component cost of debt for use in the Weighted Average Cost of Capital WACC calculation we need to calculate the yield to maturity YTM on the bond which represents the pretax cost of ... View full answer

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