Target capital structure of debt and common equity

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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 = $22.50. The last dividend was D₀ = $4.00, and it is expected to grow at a 5% 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.

r_s =_____________ %

WACC = _____________ %

Reference no: EM131916404

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