Question
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
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
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Risk Management And Financial Institutions
Authors: John C. Hull
3rd Edition
1118269039, 9781118269039
