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  3. 2. cost of debt aa aa is the interest rate that a

2. Cost of debt Aa Aa is the interest rate that a firm pays on...

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2. Cost of debt Aa Aa is the interest rate that a firm pays on any new debt financing. The before-tax cost of debt C Three Waters Company (TWC) can borrow funds at an interest rate of 10.20% for a period of four years. Its marginal federal-plus-state tax rate is 45%. TWC's after-tax cost of debt is (rounded to two decimal places). At the present time, Three Waters Company (TwC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,495.56 per bond, carry a coupon rate of 10%, 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)? 1.94% 2.48% 2.16% 1,73%

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