Question $5$:

CGT bs a major producer of chemicals and plastics, Including plasticgrocery bags, Styrofoam cups, and fertilizers. The firm's noncallable $($ $$1,000$ par value$),20-$year, $725\%$ bonds with semiannual payments are seling for $$925.$ The firm's tax rate is $40\%.$ New $20-$year non$-$callable bonds can be issued at par, with a flotation cost of $2\%.$ Determine the best estimate of the affer. tax cost of debt.

$4\mathrm{.}00\%$

$544\%$

$4\mathrm{.}80\%$

$406\%$