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Business, 23.11.2019 02:31 alexalvarez304

For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (wacc)?
a. debt
b. equity
c. preferred stock
omni consumer products company (ocp) can borrow funds at an interest rate of 12.50% for a period of seven years. its marginal federal-plus-state tax rate is 30%. ocp’s after-tax cost of debt is (rounded to two decimal places).
at the present time, omni consumer products company (ocp) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. these bonds have a current market price of $1,382.73 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. the company incurs a federal-plus-state tax rate of 30%. if ocp 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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