A recent leveraged buyout was financed with $50M. This amount comprised of partners equity capital of $12M, $20M unsecured debt borrowed at 7% from one bank, and the remainder from another bank at 8.5%. What is the overall after-tax cost of the debt financing if you expect the firms marginal tax rate to be 33%?

(a) 2.55% (b) 7.71% (c) 3.34% (d) 5.17%