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Cost of Common Equity and WACC Palencia Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock. Its before-tax cost of debt is 13% and its marginal tax rate is 40%. The current stock price is P0 = $33.00. The last dividend was D0 = $2.25, and it is expected to grow at a 8% 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 = %
Which of the following statements about the net present value method of selecting projects is true?
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