At the present time, Andalusian Limited (AL) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,382.73 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 5.84%   4.38%   3.90%   4.87%

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A: After tax cost of debt = Interest rate x (1 - tax rate)

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A: The after-tax cost of debt is computed using the below-mentioned formula:

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A: Given:

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A:

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