2. An overview of a firm's cost of debt For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)? Equity Preferred stock Debt Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of seven years. Its marginal federal-plus-state tax rate is 40%. WGC's after-tax cost of debt is (rounded to two decimal places). At the present time, Westem Gas & Electric Company (WGC) has 10 year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,278,41 per bond, carry a coupon ute of 11%, and distribute annual coupon payments. The company incursa federal-plus-state tax rate of 40% If WGC wants to issue new debt, what would be a reasonable estimate for its after tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place) 5.06% 3.80% 4.85% 4.229