Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. WGC's after-tax cost of debt is (rounded to two decimal places). At the present time, Western Gas & Electric Company (WGC) 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 WGC 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.) 8.79% 9.17% O 6.11% O 7.64%
Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. WGC's after-tax cost of debt is (rounded to two decimal places). At the present time, Western Gas & Electric Company (WGC) 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 WGC 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.) 8.79% 9.17% O 6.11% O 7.64%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax
rate is 25%. WGC's after-tax cost of debt is
(rounded to two decimal places).
At the present time, Western Gas & Electric Company (WGC) 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 WGC 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.)
8.79%
9.17%
O 6.11%
O 7.64%
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