Step 1: Set up an ICE table. Let initial concentration C = 0.04 M and degree of dissociation $\alpha = 0.005$.
Step 2: At equilibrium, $[HA] = C(1-\alpha) = 0.04 \times 0.995 = 0.0398$ M, and $[H^+] = [A^-] = C\alpha = 0.04 \times 0.005 = 2 \times 10^{-4}$ M.
Step 3: Apply the equilibrium expression: $K_a = \dfrac{[H^+][A^-]}{[HA]} = \dfrac{(2\times10^{-4})^2}{0.0398} = \dfrac{4\times10^{-8}}{0.0398}$
Step 4: $K_a \approx 1.005\times10^{-6}$, which rounds to $10^{-6}$.
\[\boxed{K_a = 10^{-6}}\]