If a company with a rating of BBB has on issue debentures paying a coupon rate of 6% pa and the market yield on similar BBB securities is 7% pa, what is the correct cost of debenture capital (k_db), before tax,that the company should use when estimating the WACC using the textbook WACC formula? The riskfree rate is 5% pa.and the Rm is 13% pa.

6%

None of the other given options is correct.

7%

5%

10%

13%