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 25%. The current stock price is P0 = $32.50. The last dividend was D0 = $2.00, and it is expected to grow at an 8% constant rate. What is its cost of common equity and its WACC?

r_s =

WACC =

Banyan Co.’s common stock currently sells for $40.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 40%, and the expected return on equity (ROE) is 10.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity?

Answer rating: 100% (QA)

For Palencia Paints Corporation Cost of Equity ke We can use the Gordon Growth Model GGM to estimate ... View the full answer