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10.4 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

10.4

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 marginal tax rate is 25%. The current stock price is P0 = $29.00. The last dividend was D0 = $2.25, 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 = %

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