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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Definitions:

Fibula

A smaller of the two bones in the lower leg, situated on the lateral side of the tibia.

Costal Cartilage

The bars of hyaline cartilage that connect the ribs to the sternum, contributing to the elasticity and expansion capability of the rib cage.

True Ribs

The first seven pairs of ribs that are directly attached to the sternum through their costal cartilages, providing vital protection for the thoracic organs.

Sternum

The long, flat bone located in the center of the chest, connected to the rib bones by cartilage, commonly known as the breastbone.