10.08

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 8%, and its marginal tax rate is 25%. The current stock price is Po = $24.50. The last dividend was Do = $2.00, 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. rs = % WACC