Problem:
Patton 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 40%. The current stock price is P0 = $21.50. The last dividend was D0 = $2.75, and it is expected to grow at a 7% constant rate.
Required:
Question: What is its cost of common equity and its WACC?
Note: Please show guided help with steps and answer.