Kenny Electric Company’s noncallable bonds were issued several years ago and now have 20 years to maturity These

Question

Kenny Electric Company’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 40%, what is the component cost of debt for use in the WACC calculation?

a. 5.08%

Finance