Palencia paints corporation has a target capital structure, Finance Basics

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Palencia paints corporation has a target capital structure

Question: Cost of Common Equity and WACC

Palencia Paints Corporation has a target capital structure of 45% debt and 55% common equity, with no preferred stock. Its before-tax cost of debt is 12% and its marginal tax rate is 40%. The current stock price is P0 = $22.00. The last dividend was D0 = $4.00, and it is expected to grow at a 7% 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.

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Finance Basics: Palencia paints corporation has a target capital structure

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