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2. An overview of a firm's cost of debt For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)? Debt Preferred stock Equity Andalusian Limited (AL) can borrow funds at an Interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 35%. AL's after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company Incurs a federal-plus- state tax rate of 35%. If Al 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.) 7.94% 6.62% 5.96% 5.30%