What is cost of common equity and wacc

Assignment Help Financial Management
Reference no: EM132036814

Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 12%, and its marginal tax rate is 40%. The current stock price is P0 = $30.00. The last dividend was D0 = $3.75, 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.

a. rs =  %

b. WACC =  %

Reference no: EM132036814

Questions Cloud

Calculate the firm days sales outstanding : Calculate the firm's Days Sales Outstanding, or average collection period, given this information.
What is the company expected growth rate : What is the company's expected growth rate? what portion of its net income is the firm expected to pay out as dividends?
What is the cost of the preferred stock : Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. What is the cost of the preferred stock, including flotation?
What is evanec cost of retained earnings-rs : What is Evanec's percentage flotation cost, F? What is Evanec's cost of retained earnings, rs?
What is cost of common equity and wacc : The last dividend was D0 = $3.75, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?
What would be cost of new equity : New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity?
What would be cost of equity from new stock : If the company issued new stock, it would incur a 12% flotation cost. What would be the cost of equity from new stock?
What is pearson cost of common equity : Pearson's CFO estimates that the company's WACC is 13.30%. What is Pearson's cost of common equity?
What is holmes after-tax cost of debt : If its marginal tax rate is 40%, what is Holmes's after-tax cost of debt?

Reviews

Write a Review

Financial Management Questions & Answers

  Determine the total two-year interest cost under each plan

Boatler Used Cadillac Co. requires $880,000 in financing over the next two years. Determine the total two-year interest cost under each plan.

  Currently financed entirely with equity

Your company doesn't face any taxes and has $505 million in assets, currently financed entirely with equity.

  Cost of equity and corporate tax rate-levered value

Cavo Corporation expects an EBIT of $23,000 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 35 percent. What is the current value of the company? What will the value of the firm b..

  Determine what is the aftertax cost of debt

Jiminy's Cricket Farm issued a 30-year, 6.5 percent semiannual bond 7 years ago. The bond currently sells for 107 percent of its face value.

  Calculate the portfolio weight for each stock

Determining portfolio weights: A portfolio contains 65 shares of Stock A selling for $32 per share and 175 shares of Stock B selling for $26 per share. Calculate the portfolio weight for each stock.

  Explain the momentum effect

Explain the momentum effect. Also, explain how you set up a momentum trading strategy.

  Compute percentage total return-what was dividend yield

Calculating Returns. Suppose a stock had an initial price of $78 per share, paid a dividend of $1.25 per share during the year, and had an ending share price of $87. Compute the percentage total return. What was the dividend yield? The capital gains ..

  Indifferent between investing the funds in united states

A corporate investment manager needs to invest $1,000,000 for the next 6 months. The current nominal rate of interest in the United States is 5%, while the nominal rate of interest in Argentina is 8%. The manager is indifferent between investing the ..

  Decision for independent project with conventional cash flow

Which of the following are definite indicators of an accept decision for an independent project with conventional cash flows?

  Complete business program-including tuition-costs of living

Raul's friend wants to fo to business school. While his father will share some of the expenses, Zach will still needs to put in the rest of his own. But Zach has no money saved for it yet. According to him, it will take him $16,391 to complete the bu..

  What is your best estimate of the company cost of equity

If the stock sells for $36 per share, what is your best estimate of the company’s cost of equity?

  What do you call this hedging technique

What do you call this hedging technique?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd