Question: Alpha has an outstanding bond issue that has a 7% semiannual coupon, a current maturity of 20 years, a face value of $1000, and sells

Alpha has an outstanding bond issue that has a 7% semiannual coupon, a current maturity of 20 years, a face value of $1000, and sells for $967.97. The firm's income tax rate is 40%. What should Alpha use as an after-tax cost of debt for cost of capital purposes? (Show calculations.)

Select one:

a. 4.42%

b. 8.15%

c. 4.38%

d. 5.26%

e. 4.85%

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