Sen Corp., a publicly$-$traded, mid$-$cap company, wanted to obtain $$30$ million in new capital to expand its Iowa plant. Cost of capital was a factor in making the decision. Sen Corp. could either issue new preferred stock or new debentures. Sen Corp.$$s underwriter estimated that preferred stock should have an annual dividend payout of $$6$ and an issue price of $$103$ per share. The debentures should have a coupon interest rate of $9\%$ and an issue price of $$101.$ Sen Corp.$$s marginal income tax rate was $40\%.$ Which of the following approaches describes Sen Corp.$$s best strategy?

Sen Corp. should issue the debentures since the after$-$tax cost of debt $(5\mathrm{.}347\%)$ would be less than the cost of equity $(6\%).$

Sen Corp. should issue the preferred stock because the cost of equity $(6\%)$ is less than the cost of debt $(9\%).$

Sen Corp. should issue the debentures since the after$-$tax cost of debt $(5\mathrm{.}347\%)$ would be less than the cost of equity $(5\mathrm{.}825\%).$

Sen Corp. should issue the preferred stock because the cost of equity $(5\mathrm{.}825\%)$ is less than the cost of debt $(9\%).$