1. Gul Corp. considers the following capital structure optimal: 40% debt; 50% equity; and 10% preferred stock. Guls bond currently sells in the market for $1150. The bond carries an annual coupon payment of 12 % of the face value which is paid in two semiannual payments. The bond will mature in 15 years and its face value is $1000. The firms marginal tax rate is 40 percent. What is Gul's after-tax annual cost of debt?

   	1.	5.021%
   	2.	6.025%
   	3.	10.04%
   	4.	cannot be determined without additional information
   	5.	2.41%