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:

Aristotle

An ancient Greek philosopher and scientist who made significant contributions to numerous fields of study.

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