Bonds outstanding-what is cost of equity

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Reference no: EM131903183

Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $1,700. The company has $3,400 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? 9.51 percent 10.86 percent 12.22 percent 8.15 percent 13.58 percent.

Reference no: EM131903183

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