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 11%, and its marginaltax rate is 25%. The current stock price is Po = $26.50. The last dividend was Do $2.50, and it is expected to grow at a 4% constant rate. What is its cost of common equityand its WACC? Do not round intermediate calculations. Round your answers to two decimal places.rs=WACC =%%

Debt weight40%Equity weight60%Before-tax cost of debt11%Tax rate25%Dividend paid$2.50Growth…

Answered: Palencia Paints Corporation has a…

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

Problem 1PS

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Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 10.00%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
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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 11%, and its marginal tax rate is 25%. The current stock price is Po= $34.00. The last dividend was Do = $2.25, and it is expected to grow at a 4% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. Ts= WACC= % % 4

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