Al's Pub Has Debt with Both a Book and a Market

Multiple Choice

Al's Pub has debt with both a book and a market value of $120,000. This debt has a coupon rate of 9% and pays interest annually. The expected earnings before interest and taxes are $42,600, the
Tax rate is 34%, and the unlevered cost of capital is 11%. What is the firm's cost of equity?

A) 11.90%
B) 12.07%
C) 12.11%
D) 12.15%
E) 12.18%