Westbrook's Painting Co

question 7

Multiple Choice

Westbrook's Painting Co.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%

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Definitions:

Exception

An event, typically an error or unexpected condition, that disrupts the normal flow of a program's execution, requiring special processing.

On-demand

Services or products that are made available to users as needed, often instantly or at their convenience, through the use of technology.

Supply Chain Management

The management of the flow of goods and services, involving the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Financial Management

The planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization or individual.