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make sure if my answers are correct, Thank you!! The before-tax cost of debt is the interest rate that a firm pays on any new
make sure if my answers are correct, Thank you!!
The 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 12.50% for a period of seven 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 20-year noncallable bonds with a face value of $1,000 thot are outstanding. These bonds have a current market price of $1,382.73 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 aftertax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 5.31% 7.64% 5.98% 6.64% Step by Step Solution
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