Port Harcourt Energy Plc has the following capital structure: ₦500,000,000 in 15% debentures and ₦1,000,000,000 in ordinary equity. The company's effective income tax rate under CITA is 30%. What is the after-tax cost of the debenture finance?

The after-tax cost of debt = pre-tax coupon rate × (1 − tax rate) = 15% × (1 − 0.30) = 15% × 0.70 = 10.5%. Interest payments on debentures are tax-deductible under CITA, creating a tax shield that reduces the effective cost of debt to the company. Options A, C, and D either ignore the tax shield or apply it incorrectly.