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For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)? O Debt Preferred stock Equity
For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)? O Debt Preferred stock Equity Perpetualcold Refrigeration Company (PRC) can borrow funds at an interest rate of 10.20% for a period of six years. Its marginal federal-plus-state tax rate is 40%. PRC's after-tax cost of debt is 6.12% (rounded to two decimal places). At the present time, Perpetualcold Refrigeration Company (PRC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If PRC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 02.85% 1.98% 0 2.48% 2.98%
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