Cost of common equity and waccpalencia paints corporation, Ask an Expert

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Cost of Common Equity and WACC

Palencia Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock. Its before-tax cost of debt is 10% and its marginal tax rate is 40%. The current stock price is P0 = $21.00. The last dividend was D0 = $3.50, and it is expected to grow at a 7% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places. Do not round your intermediate calculations.

a. rs = ___%

b. WACC = __%

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Financial Management, Finance

Category:- Financial Management
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