Target capital structure-debt and common equity

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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 10% and its marginal tax rate is 40%. The current stock price is P0 = $26.00. The last dividend was D0 = $4.00, 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.

rs = %

WACC = %

Reference no: EM131562640

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