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)? O Preferred stock O Equity O Debt Three Waters Company (TWC) can borrow' funds at an interest rate of 11.10% for a period of four years. Its marginal federal-plus-state tax rate is 40%. TWC's after-tax cost of debt is (rounded to two decimal places) At the present time, Three Waters Company (TWc) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. 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)? 4.87% 3.90% 5.84% 0 4.38%