Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,400. The company has $2,800 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?
Multi-choice:
A)9.51 percent
B)10.86 percent
C)8.15 percent
D)12.22 percent
E)13.58 percent
Please show workings.