What is the after-tax cost of debt given that the DC Ltd. could issue $1,000 face value bonds with a 7 percent coupon paid semi-annually, a five-year maturity at $1050 per bond and the marginal tax rate is 30 percent?

1. 4.08%

2. 3.56%

3. 5.47%

4. 7.13%

5. None of the above.