Answered step by step

Verified Expert Solution

## Question

1 Approved Answer

# 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%

## Step by Step Solution

There are 3 Steps involved in it

### Step: 1

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 ...### Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

### Step: 2

### Step: 3

## Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started