drop down as followed

1. outstanding / secured / new
2. outstanding / secured / new
3. after-tax / before-tax
4. after-tax / before-tax
5. after-tax / before-tax
6. outstanding / new
7. outstanding / new
8. relevant / irrelevant
9. outstanding / secured / new
10. current yield rate / yield to maturity / coupon interest rate
11. current yield rate / yield to maturity / coupon interest rate
12. current yield rate / yield to maturity / coupon interest rate
13. long / short
14. long / short

Cost of Capital: Cost of Debt A firm's before-tax cost of debt, rd, is the interest rate that the firm must pay on - -Select- debt. Because interest is tax deductible, the relevant cost of I debt used to calculate a firm's WACC is the [ cost of debt, rd(1T). The - Select- cost of debt is used in calculating the WACC because we are interested in maximizing the value of the firm's stock, and the stock price depends on - Select- vash flows. It is important to emphasize that the cost of The rate at which the firm has borrowed in the past is [v because we need to know the cost of - Select- capital. For these reasons, the on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the . The on the company's -term debt is generally used to calculate the cost of debt because, more often than not, the capital is being raised to fund -term projects. Quantitative Problem: 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and an 8% coupon, semiannual payment ( $40 payment every 6 months). The bonds currently sell for $894.87. If the firm's marginal tax rate is 25%, what is the firm's after-tax cost of debt? Do not round intermediate calculations. Round your answer to two decimal places. %