Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,400 in perpetuity. The company has $2,500 in bonds outstanding that have a 7 percent coupon and pay interest annually in perpetuity. The bonds are selling at par value. What is the cost of equity?,HINT: First get the value of the unlevered firm. Then get the value of the levered firm. Next, get the debt-equity ratio so you can calculate the cost of equity. Here you need both M&M propositions.,,answer options:,13.36 percent ,8.02 percent ,10.69 percent ,12.03 percent ,9.35 percent
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