Business, 12.08.2020 04:01 Baby010391

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Water and Power Company (WPC) 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%. WPC's after-tax cost of debt is (rounded to two decimal places).
At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. 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)?
A. 4.02%
B. 4.47%
C. 3.58%
D. 5.14%

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To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Water and Power C...

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