Ivanhoe Chiropractic Clinic produces $$370,000$ of cash flow each year. The firm has no debt outstanding, and its cost of equity capital is $16$ percent. The firm's management would like to repurchase $$750,000$ of its equity by borrowing $$750,000$ at a rate of $10$ percent per year. If we assume that the debt will be perpetual, find the cost of equity capital for Ivanhoe after it changes its capital structure.

Assume that the Modigliani and Miller Proposition $1$ assumptions hold. $($Round answer to $2$ decimal places, e$.$g$.17\mathrm{.}54\%.)$

Cost of equity capital

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