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:

Orange Odor

A characteristic smell associated with orange or citrus fruits, often due to the presence of compounds like limonene.

Acid Chloride

A class of organic compounds derived from carboxylic acids by replacing the hydroxyl group with a chlorine atom, used in organic synthesis.

Fischer Esterification

A chemical reaction that forms an ester upon the treating of an alcohol with a carboxylic acid in the presence of acid catalyst.

Acetic Acid

A clear, colorless liquid with a strong vinegar odor, widely used as a solvent and chemical reagent, particularly in the production of vinyl acetate monomer and acetic anhydride.