The Lincoln Company sold a $1,000 par value, noncallable bond several years ago that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $925 and the company's tax rate is 25%. What is the component cost of debt for use in the WACC calculation?
A. 5.35%
B. 5.58%
C. 5.81%
D. 6.04%
E. 6.28%
Answer: C
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