Palencia Paints Corporation has a target capital structure of 45% debt and 55% 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 Po = $23.00. The last dividend was Do = $3.50, and it is expected to grow at an 8% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. a. rs = % b. WACC = %

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6) see picture 

Palencia Paints Corporation has a target capital structure of 45% debt and 55% 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 Po = $23.00. The last dividend was Do = $3.50, and it is expected to grow at an 8% constant rate. What is its
cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places.
a. rs =
%
b. WACC =
%
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Transcribed Image Text

Palencia Paints Corporation has a target capital structure of 45% debt and 55% 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 Po = $23.00. The last dividend was Do = $3.50, and it is expected to grow at an 8% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. a. rs = % b. WACC = %

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