Reference no: EM13870740
Johnson Tire Distributors has an unlevered cost of capital of 13 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,700. The company has $3,200 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?
A. 15.27 percent
B. 12.21 percent
C. 10.69 percent
D. 9.16 percent
E. 13.74 percent
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