You are opening a Mexican restaurant in the midtown. Given below financial information of your company, please answer the following

question.

Loan amount: $$400,000$

Interest expenses: $$50,000$

Tax rate: $20\%$

Equity financing: $$400,000$

Equity partner share: $40\%$

Net income: $$200,000$

How much is the cost of debt?

$8\mathrm{.}5\%$

$10\%$

$12\mathrm{.}5\%$

$14\%$