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1. The Holmes Company's currently outstanding bonds have a 7% coupon and a 13% yield to maturity. Holmes believes it could issue new bonds at

1. The Holmes Company's currently outstanding bonds have a 7% coupon and a 13% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.

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