Anderson's Furniture Outlet Has an Unlevered Cost of Capital of 10%,a

Multiple Choice

Anderson's Furniture Outlet has an unlevered cost of capital of 10%,a tax rate of 34%,and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

A) 8.67%
B) 9.34%
C) 9.72%
D) 9.99%
E) 10.46%