Use the following information for the next four questions: XYZ Co. is estimating its WACC. Assume the company's tax rate is 40%. DEBT: 6,000 10% coupon bonds outstanding, $1,000 par value, eight years left to maturity, selling for 87% of par; the bonds make semiannual payments. The flotation costs on new debt runs $20 per bond. PREFERREDSTOCK: 60,000 shares of 11% preferred stock outstanding with $100 par value, currently selling for $80 per share. Flotation costs are generally 5% of market value. COMMON STOCK: 200,000 shares outstanding selling for $40 per share; the last dividend paid was $4.00 and the expected long range rate of growth is 6.5% for the foreseeable future. The firm expects to have net income of $2,500,000 in the coming planning period and customarily pays out 25% as dividends. Flotation cost on new equity usually runs 10% of market value. What is XYZ company's after-tax component cost of debt? 6.845% Use the following information for the next four questions: XYZ Co. is estimating its WACC. Assume the company's tax rate is 40%. DEBT: 6,000 10% coupon bonds outstanding, $1,000 par value, eight years left to maturity, selling for 87% of par; the bonds make semiannual payments. The flotation costs on new debt runs $20 per bond. PREFERREDSTOCK: 60,000 shares of 11% preferred stock outstanding with $100 par value, currently selling for $80 per share. Flotation costs are generally 5% of market value. COMMON STOCK: 200,000 shares outstanding selling for $40 per share; the last dividend paid was $4.00 and the expected long range rate of growth is 6.5% for the foreseeable future. The firm expects to have net income of $2,500,000 in the coming planning period and customarily pays out 25% as dividends. Flotation cost on new equity usually runs 10% of market value. What is XYZ company's after-tax component cost of debt? 6.845%