1. 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 25%. The current stock price is P0 = $31.00. The last dividend was D0 = $2.00, and it is expected to grow at an 8% 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= %

WACC= %

2. Olsen Outfitters Inc. believes that its optimal capital structure consists of 40% common equity and 60% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of r_s = 10%. New common stock in an amount up to $6 million would have a cost of r_e = 11.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of r_d = 9% and an additional $3 million of debt at r_d = 13%. The CFO estimates that a proposed expansion would require an investment of $4.6 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.