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Firm PooX has $2 million in outstanding long-term debt (face value), the current quote = $980, coupon rate of 9%, semiannual coupons, 10 years to maturity, and the tax rate = 40%

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Firm PooX has $2 million in outstanding long-term debt (face value), the current quote = $980, coupon rate of 9%, semiannual coupons, 10 years to maturity, and the tax rate = 40%. It also has short-term liabilities (6 months) with a market value of $500,000. If the current value of the equity is $1million with a book value of $1.5 million, what is the after-tax required rate of return on the debt?

5.59%

2.79%

4.66%

9.31%

None of the above