Madison Square Stores has a $20 million bond issue outstanding that currently has a market value of $18.6 million. The bonds mature in 6.5 years and pay semiannual interest payments of $35 each. What is the firm's pretax cost of debt?
- 4.21 percent
- 8.42 percent
- 7.58 percent
- 7.74 percent
- 7.80 percent