To Help Finance a Major Expansion,Castro Chemical Company Sold a Noncallable

Multiple Choice

To help finance a major expansion,Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity.This bond has a 9.25% annual coupon,paid semiannually,sells at a price of $1,075,and has a par value of $1,000.If the firm's tax rate is 40%,what is the component cost of debt for use in the WACC calculation?

A) 4.35%
B) 4.58%
C) 4.83%
D) 5.08%
E) 5.33%