Several years ago the xxxxx Co. sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly . The bond currently sells for $900.90, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation?
i'm using a calculator of type HP10bII
i think that $1,000 par value bond is the FV since that's what it's worth at the end
where does the %40 tax rate matter?
how do i set up the ecuasion?
i figured it out so nevermind, in calc. HP10bII it follows:
4p/yr
n=50 (25x4, quarterly)
pv=900.90
pmt= 20 (80/4)
fv=1000
then times that by 1-.4(tax rate) to get the answer