please show work in written form (not excel) thank you.

S. Claus & Company is planning a zero coupon bond issue. The bond has a par value of $1,000, matures in 2 years, and will be sold at a price of $826.45. The firm's marginal tax rate is 40 percent. What is the annual after-tax cost of debt to the company on this issue? 4.0% 16.0% 8.0% 10.0% | 12.0%