Johnson Tire Distributors Has Debt with Both a Face and a Market

question 17

Multiple Choice

Johnson Tire Distributors has debt with both a face and a market value of $12,000.This debt has a coupon rate of 6 percent and pays interest annually.The expected earnings before interest and taxes are $2,100,the tax rate is 30 percent,and the unlevered cost of capital is 11.7 percent.What is the firm's cost of equity?

• A)22.46 percent
• B)22.87 percent
• C)23.20 percent
• D)23.59 percent
• E)25.14 percent

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Definitions:

Townshend Acts

A series of British laws passed in the late 1760s taxing American colonists on imported goods like paper, tea, glass, and paint, leading to widespread protest.

Women

Female human beings, making up approximately half of the global population, with diverse roles and contributions in society, culture, economy, and family life.

Resistance

Opposition against an entity or force, often described within contexts of social and political movements.

Quebec Act

A 1774 act of the British Parliament that set procedures of governance in the Province of Quebec and was viewed by the thirteen American colonies as a direct threat to their governance and land claims.