4.Suppose Kampo, a men's ware retail company located in Toronto, has an unlevered cost of capital of 12% and expected earnings before interest and taxes of $120,000 each year.

The company has $100,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

Assume the corporate tax of 40% is imposed.