Hey Guys!, Inc. has debt with both a book and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes are $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?

A) 13.25%
B) 13.89%
C) 13.92%
D) 14.14%
E) 14.25%

Market Value

The current price at which an asset or company can be bought or sold in the market.

Expected Earnings

The forecasted income that a company anticipates earning over a specific period, often used by investors to gauge potential investment returns.

Unlevered Cost

Unlevered cost refers to the cost of an investment or project that does not include the effects of debt financing, illustrating the cost based solely on equity financing.