Bonds are selling at par value-what is cost of equity

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Johnson Tire Distributors has an unlevered cost of capital of 11 percent, a tax rate of 33 percent, and expected earnings before interest and taxes of $1,300. The company has $2,300 in bonds outstanding that have a 7 percent coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

Reference no: EM131343525

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