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 9%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 11.60%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. Please explain how you got your answer, thank you.

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A: Calculation of cost of capital of common equity

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