Palencia paints corporation has a target capital structure, Ask an Expert

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Palencia Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. Its before-tax cost of debt is 12%, and its marginal tax rate is 40%. The current stock price is P0 = $23.50. The last dividend was D0 = $4.00, and it is expected to grow at a 5% 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.

rs = %

WACC = %

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Financial Management, Finance

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