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3. Cost of debt The is the interest rate that a firm pays on any new debt financing. western Gas & Electric Company (WGC) can

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3. Cost of debt The is the interest rate that a firm pays on any new debt financing. western Gas & Electric Company (WGC) can borrow funds at an interest rate of 7.30% for a period of five years. Its marginal federal-plus-state tax rate is 35%. WGC's after-tax cost of debt is places). (rounded to two decimal 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 cf 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% 4.95% O 6.19% 9 5.57% Search the web and Windows

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