Cost of Capital: Cost of Debt- A firm's before-tax cost of debt, rd, is the interest rate that the firm must pay on -Select- calculate a firm's WACC is the -Select- cost of debt, ra(1-T). The -Select- debt used to debt. Because interest is tax deductible, the relevant cost of -Select- cost of debt is used in calculating the WACC because we are interested in maximizing the value of the firm's stock, and the stock price depends on -Select- cash flows. It is important to emphasize that the cost of debt is the interest rate on -Select- debt, not -Select- debt because our primary concern with the cost of capital is its use in capital budgeting decisions. The rate at which the firm has borrowed in the past is -Select- because we need to know th cost of -Select- capital. For these reasons, the -Select- on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the -term debt is generally used to calculate the cost of debt because, more often than not, the capital is being -Select- The -Select- raised to fund -Select--term projects. on the company's -Select- Quantitative Problem: 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and a 6% coupon, semiannual payment ($30 payment every 6 months). The bonds currently sell for $847.87. If the firm's marginal tax rate is 25%, what is the firm's after-tax cost of debt? Do not round intermediate calculations. Round your answer to two decimal places. %