A corporate bond has a face value of $1,000 and a coupon rate of 6.5%. The bond matures in 10 years and has a current market price of $985. If the corporation sells more bonds it will incur flotation costs of $36 per bond. If the corporate tax rate is 34%, what is the after-tax cost of debt capital?
a) 5.71%
b) 5.45%
c) 5.18%
d) 4.78%
e) 5.89%