Room and Board Has Determined That $41,650 Is the Break-Even

Multiple Choice

Room and Board has determined that $41,650 is the break-even level of earnings before interest and taxes for the two capital structures it is considering.The one structure consists of all equity with 15,500 shares of stock.The second structure consists of 12,500 shares of stock and $65,000 of debt.What is the interest rate on the debt?

A) 7.72 percent
B) 8.19 percent
C) 9.38 percent
D) 11.55 percent
E) 12.40 percent