Reasonable estimate for its after-tax cost of debt

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Three Waters Company has outstanding 5-year noncallable bonds with a face value of $1,000. These bonds have a current market price of $1,050.76 and an annual coupon rate of 10%. The company faces a tax rate of 30%. If the company wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt?

A. 6.09

B. 4.87

C. 7.00

D. 5.48

Reference no: EM131548892

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