Question
Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's
Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 8%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 10.00%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
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Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
7th Edition
0357442040, 978-0357442043
