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At the present time, Water and Power Company ( WPC ) has 2 0 - year noncallable bonds with a face value of $ 1

At the present time, Water and Power Company (WPC) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,181.96 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a 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.)
9.27%
6.45%
8.06%
9.67%
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