Aspen's Distributors Has a Levered Cost of Equity of 13

question 22

Multiple Choice

Aspen's Distributors has a levered cost of equity of 13.84 percent and an unlevered cost of capital of 12.5 percent.The company has $5,000 in debt that is selling at par.The levered value of the firm is $14,600 and the tax rate is 25 percent.What is the pretax cost of debt?

• A)7.92 percent
• B)9.07 percent
• C)8.16 percent
• D)8.84 percent
• E)9.00 percent

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