Power Corporation, a sewing machine manufacturer, is contemplating selling $10 million worth 10-year, 8% coupon bonds with a par value of $1,000. Because current market interest rates are greater than 8%, the firm must sell the bonds at $980. Flotation costs are 4%. What would be the cost of long-term debt for Power Corporation?

A.

7.22%

B.

8.87%

C.

7.96%

D.

9.88%