X X 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)? Equity Preferred stock Debt Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of five years. Its marginal federal-plus-state tax rate is 25%. ALS after-tax cost of debt is (rounded to two decimal places) At the present time, Andalusian Limited (AL) has 5-year noncalable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus state tax rate of 25%. IT 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.) 3.109 2494 3.579 3.72% Grade it Now Save & Continue Continue without saving