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Cost of Common Equity and WACC
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 9% and its marginal tax rate is 40%. The current stock price is P0 = $31.50. The last dividend was D0 = $3.00, 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.
rs = %
WACC = %
Interest rate risk occurs because of:
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