Dickson, Inc., has a debt-equity ratio of 2.85. The firm's weighted average cost of capital is 10 percentand its pretax cost of debt is 6 percent. Thetax rate is 24 percent.

What is the company's unlevered cost of equity capital?

We can use Modigliani-Miller Proposition II with corporate taxes to find the unlevered cost of equity. Doing so, we find:

R_S=R₀+ (B/S)(R₀R_B)(1 T_C)

.2550 =R₀+ (2.85)(R₀ .06)(1 .24)

R₀= .1216, or 12.16%

How is that solved? I have the answer as .1216 just not sure how to set it up to get the answer.