Distributors has an unlevered cost of capital

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Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 33 percent, and expected earnings before interest and taxes of $1,400. The company has $2,500 in bonds outstanding that have a 6 percent coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

13.64 percent

10.91 percent

12.27 percent

9.55 percent

8.18 percent

Reference no: EM131049652

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