What is the pre-tax cost of debt, Finance Basics

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What is the pre-tax cost of debt

Problem:

Aspen's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%.

Required:

Question 1: What is the pre-tax cost of debt? Explain comprehensively and provide all workings and methods.

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Finance Basics: What is the pre-tax cost of debt

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