Question: Al's Pub has debt with both a book and a market value of $120,000. This debt has a coupon rate of 9% and pays interest

Al's Pub has debt with both a book and a market value of $120,000. This debt has a coupon rate of 9% and pays interest annually. The expected earnings before interest and taxes are $42,600, the tax rate is 34%, and the unlevered cost of capital is 11%. What is the firm's cost of equity?

a. 11.90%

b. 12.15%

c. 12.11%

d. 12.18%

e. 12.07%

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