Its before-tax cost of debt is 8 and its marginal tax rate, Ask an Expert

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Patton Paints Corporation has a target capital structure of 40% debt and 60% common equity, with no preferred stock. Its before-tax cost of debt is 8% and its marginal tax rate is 40%. The current stock price is P0 = $35.00. The last dividend was D0 = $3.50, and it is expected to grow at a constant rate of 5%. What is its cost of common equity and it's WACC?

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