Three Waters Company (TWC) can borrow funds at an interest rate of 11.10% for a period of eight years. Its marginal federal-plus-state tax rate is 45%. TWCs after-tax cost of debt is _____ (rounded to two decimal places).

At the present time, Three Waters Company (TWC) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,181.96 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If TWC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)?

7.09%

5.32%

5.91%

6.80%