Currently, a company is financed with 40% equity and 60% debt. The debts consist of 15-year $1,000 face-value bonds that pay semi-annual interest payments based on an annual coupon rate of 7%. The market price of the firm's bonds is currently $1034. Further, the company has a beta of 1.4. The expected return on the market is expected to be 14% while the risk-free rate is 4%. The marginal tax rate is 40%.

What is the company's before-tax cost of debt?

A) 4.20%

B) 6.64%

C) 3.32%

D) 3.98%