10-8 COST OF COMMON EQUITY AND WACC Palencia Paints Corporation has a target capital structure of 35 % debt and 65 % common equity , with no preferred stock . Its before -tax cost of debt is 8 %, and its marginal tax rate is 25%. The current stock price is Po $22.00. The last dividend was D0 = $2.25, and is expected to grow at 5% constant rate. What is its cost of common equity and its WACC?