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An overview of a firm's cost of debt he before-tax cost of debt is the interest rate that a firm pays on any new debt
An overview of a firm's cost of debt he 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 11.10% for a period of five years. Its marginal federal-plus-state tax rate is 25%. WPC's after-tax cost of debt is (rounded to two decimal places) At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incursa federal-plus-state tax rate of 25%. 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)? (Note: Round your YTM rate to two decimal place) 6.88% 6.11% 9.17% 7.64%
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