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

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Johnson Tire Distributors has an unlevered cost of capital of 12 %, a tax rate of 34 %, and expected earnings before interest and taxes of $1,600. The company has $2,700 in bonds outstanding that have a 7 % coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

Reference no: EM131087908

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