2. An overview of a firm's cost of debt The before-tax cost of debt is the interest rate that a firm pays on any new debt financing. Three Waters Company (TWC) can borrow funds at an interest rate of 9.70% for a period of five years. Its marginal federal-plus-state tax rate is 25%. TWC's after-tax cost of debt is 7.28% (rounded to two decimal places). At the present time, Three Waters Company (TWC) 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 rate of 11%, and distribute annual coupon payments. The company incurs a federal- plus-state tax rate of 25%. If TWC 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.) O 4.74% O 6.06% O 6.32% 0 5.27%