1. If Newbury, Inc. wants to issue new bonds with a market interest rate of 7%, what is the after-tax cost of debt if the marginal tax rate is 25% and the corporate target weight for financing is 40% bonds, 50% common stock and 5% internal equity and 5% preferred stock ?

   Choose one answer.

   	a.	5.25%
   	b.	2.10%
   	c.	7.00%
   	d.	4.20%