The unlevered cost of capital for Red Ryder, Inc. is 12%. Pretax debt costs are 8%. Assuming a debt equity ratio of 0.33, what is the cost of equity? The tax rate is 34%.

A) 11.0%
B) 12.6%
C) 12.9%
D) 13.4%
E) 13.8%

Debt Equity Ratio

This metric assesses a corporation's financial leverage by comparing its overall liabilities to the equity of its stockholders.

Pretax Debt Costs

The expenses related to debt before income taxes are applied, such as interest expenses.

Tax Rate

The percentage at which an individual or corporation is taxed by the government, which can vary based on income level, type of taxpayer, or type of income.