Tomson Company has a 21% tax rate. It has issued 20,000 shares of common stock and has equity of $900,000. In addition, the corporation has debt at a before-tax rate of 5.25% in amounts as shown below on the relevant portion of the balance sheet. Further assume the companys beta is 1.2. 10-year US treasuries carry a rate of 0.98, and our analysts estimate a market return of 11.8%.

Accounts payable 20,000

Notes payable 10,000

Accruals 16,000

Current portion of long term debt 27,260

Total current liabilities 73,260

Long term debts 568,334

Total liabilities 641,594

Calculate the cost of equity using CAPM. (Please show how to calculate.)