Aspen's Distributors Has a Levered Cost of Equity of 13

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