Question: Abbott Printing plans to issue a $1,000 par value, 15-year bond with a 7.20% annual coupon, paidsemiannually. The company applies an average tax rate of

Abbott Printing plans to issue a $1,000 par value, 15-year bond with a 7.20% annual coupon, paidsemiannually. The company applies an average tax rate of 40% for cost of capital decision-making purposes but Congress is considering a change in the corporate tax rate. This change would bring the firms average tax rate down to 30%. By how much would the after-tax component cost of debt used to calculate the WACC change if the new tax rate is adopted?

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