The stock is currently selling for $15.25 per share and it's non-Cala bowl thousand dollar par value 20 years 7.25 bond with semi annual payments are selling for $875 the beta is 1.25 the yield on a six month treasury bill is 3.5% and the yield on a 20 year treasury bond is 5.5% they were required return on the stock market is 11.5% but the market has had an average annual return of 14.5% during the past 5 years the firms tax rate is 40%

Assets Current assets $ 38,000,000 Net plant, property, and equipment _101.000.000 Total assets $139.000.000 Liabilities and Equity Accounts payable $ 10,000,000 Accruals 9.000.000 Current liabilities $ 19.000.000 40.000.000 Long-term debt (40,000 bonds, $1.000 par value) Total liabilities Common stock (10,000,000 shares) $ 59.000.000 30,000,000 Retained earnings 50.000.000 80.000.000 Total shareholders' equity Total liabilities and shareholders' equity $139.000.000 1. Refer to Exhibit 1. What is the best estimate of the after-tax cost of debt? 04.88% O 5.40% 5.14% 4.64%