Kate's Dry Goods Currently Has 15,000 Shares of Stock Outstanding

Multiple Choice

Kate's Dry Goods currently has 15,000 shares of stock outstanding. Kate would like to reduce the outstanding shares by one-third by issuing debt and repurchasing stock. The firm has an EBIT of
$8,400 and a cost of debt of 7%. How much debt does Kate have to issue to accomplish her goal if
She wishes EBIT to remain constant?

A) $32,000
B) $35,000
C) $37,000
D) $40,000
E) $42,000