Mason-Dixon Stores has two bond issues outstanding. The first issue has a coupon rate of 9 percent, matures in 4 years, has a total face value of $10 million, and is quoted at 109 percent of face value. The second issue has a 7 percent coupon, matures in 11 years, has a total face value of $22 million, and is quoted at 101 percent of face value. Both bonds pay interest semiannually. What is the weighted average after-tax cost of debt if the tax rate is 35 percent?

Select one:

a. 4.37 percent

b. 6.72 percent

c. 4.98 percent

d. 2.35 percent