1. 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 9%, and its marginal tax rate is 40%. The current stock price is P₀ = $27.00. The last dividend was D₀ = $3.75, and it is expected to grow at a 8% 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.

1. r_s =
3. WACC =

2.

The Pawlson Company's year-end balance sheet is shown below. Its cost of common equity is 18%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1,198. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Assets			Liabilities And Equity
Cash	$ 120		Accounts payable and accruals	$ 10
Accounts receivable	240		Short-term debt	48
Inventories	360		Long-term debt	1,150
Plant and equipment, net	2,160		Common equity	1,672
Total assets	$2,880		Total liabilities and equity	$2,880

Calculate Pawlson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations.

3. Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $4 million of retained earnings with a cost of r_s = 12%. New common stock in an amount up to $9 million would have a cost of r_e = 14%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of r_d = 10% and an additional $3 million of debt at r_d = 12%. The CFO estimates that a proposed expansion would require an investment of $5.8 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.