Anderson's Furniture Outlet has an unlevered cost of capital of 10.3 percent, a tax rate of 21 percent, and expected earnings before interest and taxes of $1,900. The company has $4,000 in bonds outstanding that have an annual coupon of 7 percent. If the bonds are selling at par, what is the cost of equity?

Multiple Choice

a. 11.33 percent

b. 9.34 percent

c. 10.72 percent

d. 9.99 percent

e. 11.21 percent

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