Printing Plans to Issue a $1,000 Par Value, 20-Year Noncallable

Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually.The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 30.00%.By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

A) 0.57%
B) 0.63%
C) 0.70%
D) 0.77%
E) 0.85%

Correct Answer:

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