Johnson tire distributors has an unlevered cost of capital, Ask an Expert

Finance

Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 33 percent, and expected earnings before interest and taxes of $1,400. The company has $2,500 in bonds outstanding that have a 6 percent coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

13.64 percent

10.91 percent

12.27 percent

9.55 percent

8.18 percent

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91774073

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