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 11%, and its tax rate is 25%. The current stock price is Po = $26.50. The last dividend was Do = $2.50, and it is expected to grow at a 4% constant rate. What is its cost of com and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. rs= %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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 11%, and its marginal
tax rate is 25%. The current stock price is Po = $26.50. The last dividend was Do $2.50, and it is expected to grow at a 4% constant rate. What is its cost of common equity
and its WACC? Do not round intermediate calculations. Round your answers to two decimal places.
rs=
WACC =
%
%
Transcribed Image Text: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 11%, and its marginal tax rate is 25%. The current stock price is Po = $26.50. The last dividend was Do $2.50, and it is expected to grow at a 4% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. rs= WACC = % %
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