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What is the cost of equity

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Question - Suppose SteveSmith, a men's ware retail company located in Toronto, has an unlevered cost of capital of 12% and expected earnings before interest and taxes of $120,000 each year.

The company has $100,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity? Assume the corporate tax of 40% is imposed.

Reference no: EM133047192

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