Kate's Dry Goods Currently Has 15,000 Shares of Stock Outstanding

Kate's Dry Goods currently has 15,000 shares of stock outstanding. Kate would like to reduce the outstanding shares by one-third by issuing debt and repurchasing stock. The firm has an EBIT of $8,400 and a cost of debt of 7%. How much debt does Kate have to issue to accomplish her goal if she wishes EBIT to remain constant?

A) $32,000
B) $35,000
C) $37,000
D) $40,000
E) $42,000