2. An overview of a firm's cost of debt To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1 - 1) . Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 11.10% 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, Western 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 $1,495.56 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a 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.) 2.70% 1.88% 2.12% 2.35%