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ABC company has an unlevered cost of capital of 12.3 percent. Its expected EBIT is $32,840 and its total tax rate is 25%. The company

ABC company has an unlevered cost of capital of 12.3 percent. Its

expected EBIT is $32,840 and its total tax rate is 25%. The company has $60,000

in bonds outstanding that sell at par value of $1,000 and pay a coupon rate of

8.9%. Market interest rate is 3.1% and the firm is at its optimal capital structure.

What is the cost of equity?

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