Johnson Tire Distributors has debt with both a face and a market value of $35,000. This debt has a coupon rate of 6.6 percent and pays interest annually. The expected earnings before interest and taxes are $8,300, the tax rate is 21 percent, and the unlevered cost of capital is 10.9 percent. What is the cost of equity?
A) 12.46 percent
B) 12.87 percent
C) 14.56 percent
D) 13.59 percent
E) 15.14 percent

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The Answer of Johnson Tire Distributors has debt with both a face and a market value of $35,000. This debt has a coupon rate of 6.6 percent and pays interest annually. The expected earnings before interest and taxes are $8,300, the tax rate is 21 percent, and the unlevered cost of capital is 10.9 percent. What is the cost of equity?
A) 12.46 percent
B) 12.87 percent
C) 14.56 percent
D) 13.59 percent
E) 15.14 percent

Johnson Tire Distributors Has Debt with Both a Face and a Market