Aspen's Distributors Has a Cost of Equity of 13

question 66

Multiple Choice

Aspen's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?

• A) 7.92%
• B) 8.10%
• C) 8.16%
• D) 8.84%
• E) 9.00%

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