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Palencia Paints Corporation has a target capital structure of 25% debt and 75% 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 PO $33.50. The last dividend was Do = $2.00, and it is expected to grow at a 6% 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 = 16.24 WACC 13.53 % %

Palencia Paints Corporation has a target capital structure of 25% debt and 75% 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 PO $33.50. The last dividend was Do = $2.00, and it is expected to grow at a 6% 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 = 16.24 WACC 13.53 % %

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Palencia Paints Corporation has a target capital structure of 25% debt and 75% 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 PO = $33.50. The last dividend was Do = $2.00, and it is expected to grow at a 6% 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 = 16.24 WACC = 13.53 % %
Transcribed Image Text:Palencia Paints Corporation has a target capital structure of 25% debt and 75% 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 PO = $33.50. The last dividend was Do = $2.00, and it is expected to grow at a 6% 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 = 16.24 WACC = 13.53 % %
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