2. An overview of a firm's cost of debt For which capital component must you...
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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)? Equity Debt Preferred stock Perpetualcold Refrigeration Company (PRC) can borrow funds at an interest rate of 7.30% for a period of six years. Its marginal federal-plus-state tax rate is 25%. PRC's after-tax cost of debt is (rounded to two decimal places). At the present time, Perpetualcold Refrigeration Company (PRC) has 15 -year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 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 PRC 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.) 9.17% 7.64% 6.88% 8.79%
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