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 water and power company (wpc) 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%. wpc’s after-tax cost of debt is 7.28% (rounded to two decimal places). at the present time, water and power company (wpc) has 5-year noncallable 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%. if wpc 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.)
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