Problem #1 (8 marks) Dewer International has an unlevered cost of capital of 10%, a tax rate of 35%, and expected earnings before interest and taxes of $26,500. The company has $40,000 in bonds outstanding that have a 7% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity? Assume there is no cost of financial distress and general M&M assumptions apply)