On this question, it states that a company issued bonds 2 years ago at par value with a coupon rate of 9% with a total value of 20M.
Then, the company has decided to issue new bonds at the same value, at par, with a coupon rate of 7%.
(The tax rate is 40%)
The questions asks for the after-tax cost of debt that is included in the WACC (it does not say MCC)
And the answer is = 0.07 * (1-.40) = 4.2%.
My doubt is why are not we considering the debt that was issued 2 years ago??? I did this by taking into account all debt, and i don´t really see why not.
Can anyone help me please??
Thank you in advance!!