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  3. 2. an overview of a firm's cost of debt for which

2. An overview of a firm's cost of debt For which capital component must you...

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Finance

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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)? O Equity Debt O Preferred stock Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 40%. WGC's after-tax cost of debt is (rounded to two decimal places). At the present time, Western Gas & Electric Company (WGC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? O 5.14% 6.57% 5.71% O 6.85%

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