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Problem: Cost of Common Equity and WACC

Palencia 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 = $30.50. The last dividend was D0 = $2.25, and it is expected to grow at a 4% 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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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93043007

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