Question: Cost of Common Equity
Pearson Motors has a target capital structure of 35% debt and 65% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 13.90%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.