One-third of the total market value of Johnson plc consists of bonds with a cost of 10

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One-third of the total market value of Johnson plc consists of bonds with a cost of 10 per cent. York plc is identical in every respect to Johnson except that it is financed by equity alone. York’s cost of equity is 16 per cent. According to Modigliani and Miller, if taxation and tax relief on interest are ignored, what is Johnson plc’s cost of equity?

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