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 outstanding bonds is 10%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 12.80%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

284%

Step-by-step explanation:

You calculate it using the conversion method