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Pearson Motors has a target capital structure of 3 5 % debt and 6 5 % common equity, with no preferred stock. The yield to

Pearson Motors has a target capital structure of

35 %

debt and

65 %

common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is

10 %,

and its tax rate is

25 % .

Pearson's CFO estimates that the company's WACC is

11.60 % .

What is Pearson's cost of common equity?

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