$10-3$ 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 $10\mathrm{.}50\%.$ What is Pearson's cost of common equity?