Part 1:

If the income tax rate applicable to a firm is 35% and the pre-tax cost of debt is 10%, what is the after-tax cost of debt?

A. 6.5%

B. None of the choices is correct

C. 10%

D. 3.5%

Part 2:

Target % | Component Component in Capital Cost (pre Cost Structure tax) 30.00% 2.00% 68.00% 35.00% Weighted Component Cost (after-tax) Debt Preferred Stock Equity Tax Rate Outstanding Bond WACC Preferred Stock Info Common Stock Info (Annual Coupons) Time to Maturity (years) Coupon Rate APR 6.00% Preferred Divided Current Market Price Preferred Yield 2 Current Dividend $2.00 10 48 Current Price $81.00 Expected Growth in Dividends Expected Return orn Equity 4.17% 3.00% $1,000.00 Face Value Current Market Price YTM 5.54% $1,000.00 6.00% Based on the information in the table, what is the WACC? o 5.12% 4.77% 5,02% 5.27%