Blockbuster is a video rental and retail chain. Blockbuster is forecas

Blockbuster is a video rental and retail chain. Blockbuster is forecasting its financial statements for Year 3. Selected financial information for Years 1 and 2 is provided in the table.

What is the interest expense for Blockbuster in Year 3? (Assume that Blockbuster’s average cost of debt is 7.50%.)

Selected Financial Information
Blockbuster Inc ($ ‘000)
Year 1 Year 2
Short Term Debt 31,890 162,430
Long Term Debt 1,137,256 798,300
Interest Expense 87,686

A) $70,341
B) $72,054
C) $80,667
D) $87,686
E) $135,166

ANSWER

B