The relevant cost of debt for use in a WACC computation, which will be used as the required rate of return for a new project, should be the rate that is the:
A) Average coupon rate for all outstanding bond issues.
B) Average yield-to-call for all callable bond issues.
C) After-tax weighted average yield-to-maturity of all outstanding bonds.
D) After-tax yield-to-maturity of the highest rated bond available on the market.
E) Average of the risk-free rate of return and the after-tax weighted average yield-to-maturity of all outstanding bonds.
Correct Answer:
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