Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,900. The company has $3,600 in bonds outstanding that have a 7 percent coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?

a.9.43 percent

b.12.12 percent

c.13.47 percent

d.10.78 percent

e.8.08 percent