Abascus limited has hired you to help the company make a decision on financing a proposed project. You have been provided with the following information:

i. The company issued debentures at the face value of Kshs. 100 per debenture.

ii. The coupon rate provided is 10 percent

iii. Maturity period is for 5 years

iv. Market price is Kshs. 90

Assuming corporate tax at 20 percent calculate the after-tax cost of debt for Abascus and advice the company. (10 marks)