3. Cost of debt Aa Aa For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)? Preferred stock Equity Debt Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 7.30% for a period of four years. Its marginal federal-plus-state tax rate is 40%. OCP's after-tax cost of debt is 4.38% (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) 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 40%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 3.80% 4.85% 3.38% 4.22%