Lamey Co Has an Unlevered Cost of Capital of 12

Multiple Choice

Lamey Co. has an unlevered cost of capital of 12.3 percent, a total tax rate of 25 percent, and expected earnings before interest and taxes of $32,840. The company has $60,000 in bonds outstanding that sell at par and have a coupon rate of 7.2 percent. What is the cost of equity?

A) 13.78 percent
B) 13.36 percent
C) 13.94 percent
D) 14.07 percent
E) 14.29 percent