Compute the cost of common equity

Reference no: EM131962856

Question: Cost of Common Equity and WACC 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 11% and its marginal tax rate is 40%. The current stock price is P_0 = $24.00. The last dividend was D_0 = $3.50, and it is expected to grow at a 6% 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.

Reference no: EM131962856

Questions Cloud

Determine the net present worth of cash flow from machine : Assuming the contractor's tax rate is 30% per year, determine the net present worth of the cash flow from this machine. The company's MARR is 14%."

Draw the cash flow diagram for john : It is required for John to repay all the borrowed money at the end of eight years, how much will be repaid by John as a lump-sum amount at the end of eight year

What is the present value of four-year ordinary annuity : What's the present value of a 4-year ordinary annuity of $2,750 per year plus an additional $2,500 at the end of Year 4 if the interest rate is 6.5%?

Determine the present value of the life- cycle cost : Assuming a discount rate of 4.00 percent, determine the present value of the life- cycle cost of a proposed five-mile long roadway.

Compute the cost of common equity : Cost of Common Equity and WACC Palencia Paints Corporation has a target capital structure of 45% debt and 55% common equity, with no preferred stock.

Automobile insurance coverage : Becky Fenton has 35/50/20 automobile insurance coverage. how much of this judgment would the insurance cover?

What will be the current dollar cost of labour for in-house : Assume inflation is 2 percent per year in the first year of operation. What will be the current dollar cost of labour for in-house production in the second year

Conduct the cost-benefit analysis : The cost-benefit analysis should include one of the following course-related topics: quality, patient safety, risk management, regulatory standards, compliance.

Find the value of the stock at the end of year three : Find the value of the stock at the end of year 3. If dividends are expected to grow at a 10% rate indefinitely, find the value of the stock.

User Account

All Pages