The _____ 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 7.30% for a period of four years. Its marginal federal-plus-state tax rate is 25%. WPCs after-tax cost of debt is ______ (rounded to two decimal places).

At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, 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 after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)

5.48% 6.09% 7.00% 4.87%