Conservative corporation-cost of equity capital

Question

Problem:

The Conservative Corporation has determined its weighted average cost of capital to be 13%. It has a capital structure of 60% debt, and 40% equity, with the before-tax cost of debt estimated at 10%.

If the firm's marginal tax rate is 30%, its cost of equity capital is closest to. Please answer in proper manner and show all computations

Choose one:

• 20.2%
• 16.1%
• 22%
• 18%