The Pizza Shoppe Has Debt with Both a Face and Market

question 57

Multiple Choice

The Pizza Shoppe has debt with both a face and market value of $24,000 and a coupon rate of 6.4 percent.The expected earnings before interest and taxes are $21,400,the tax rate is 35 percent,and the unlevered cost of capital is 11.4 percent.What is the firm's cost of equity?

• A)13.25%
• B)12.89%
• C)13.92%
• D)12.13%
• E)14.25%