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 45.00%. by how much would the component cost of debt used to calculate the wacc change if the new tax rate was adopted?

The WACC change if the new tax rate was adopted is - 0.35%

Explanation:

For computing the WACC change, first we have to determine the after tax cost of debt by applying the 40% and 45% tax rate which is shown below:

After tax Cost of debt = Cost of debt × ( 1- tax rate)

For 40% tax rate, it would be

= 7% × ( 1 - 40%)

= 4.2%

For 45% tax rate, it would be

= 7% × ( 1 - 45%)

= 3.85%

The change in WACC would be

= 3.85% - 4.2%

= - 0.35%

answer; /// i do believe the correct answer is (30,000);

a is the correct answer, tell me if im right