Several years ago a company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon. The bond currently sells for $875, and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation? 4.98% 4.58% 7.00% 4.92% 8.30%
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Several years ago a company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon. The bond currently sells for $875, and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation? 4.98%
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