Question 2 A company has an outstanding bond issue with a 7.75% coupon, paid semiannually, a current maturity of 20 years, and it sells for $967.97. The firm's income tax rate is 40%. What should the firm's managers use as an after-tax cost of debt for cost of capital purposes? 4.85% 2.42% 8.08% 4.04%

A company has an outstanding bond issue with a 7.75% coupon, paid semiannually, a current maturity of 20 years, and it selis for $967.97. The firm's income tax rate is 40%. What should the firm's managers use as an aiter-tax cost of debt for cost of capital purposes? 4.8546 B.08\%