3. Cost of debt Aa Aa To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1 -T). Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 35%. WGC's after-tax cost of debt is 6.31% (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 $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 35%. 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)? 7.43% 5.57% 6.19% 7.12%