Cost of common equitypearson motors has a target capital, Ask an Expert

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Cost of Common Equity

Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 13.20%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

Please explain and show how to calculate.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92087116

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