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

question 34

Multiple Choice

Keys 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%

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Definitions:

Savings

A reduction in expenditure or cost, often set aside for future use.

Labour Cost

The total expense incurred by employers for the salaries, wages, and benefits of their employees.

Labour Availability

The supply of workers qualified and ready to perform work in a specific geographic area or industry.

Call Centre Industry

A sector of the economy focused on managing customer contacts and service operations through large offices known as call centers.