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Estimate for its after-tax cost of debt

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At the present time, Western Gas & Electric Company (WGC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 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 WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt?

Reference no: EM132543946

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