3. Cost of debt

3. Cost of debt Aa Aa E The before-tax cost of debt is the interest rate that a firm pays on any new debt financing. Water and Power Company (WPC) can borrow funds at an interest rate of 9.70% for a period of six years. Its marginal federal-plus-state tax rate is 30%. WPC's after-tax cost of debt is (rounded to two decimal places). 7.47% 6.79% 9.70% 6.45% At the present time, Water and Power Company (WPC) has 10-year noncalladre Donds 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 30%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 0 0 2.47% 2.74% 3.15% 3.29% O