Palencia Paints Corporation has a target capital structure of 40% debt and 60% common equity, with...

 

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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 12%, and its marginal tax rate is 25%. The current stock price is P0 = $28.00. The last dividend was Do = $3.75, and it is expected to grow at a 5% 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 = % % 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 12%, and its marginal tax rate is 25%. The current stock price is P0 = $28.00. The last dividend was Do = $3.75, and it is expected to grow at a 5% 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 = % %

Answer rating: 100% (QA)

To calculate the cost of common equity rs we can use the Gordon Growth Model Dividend Growth Model r... View the full answer