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 40%. The current stock price is P0 $22 00. The last dividend was D0 $2 25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?

11-10 CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS *see question attached

11-10 CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS A firm with a WACC of 10% is considering the following mutually exclusive projects: Un m O 2 4 Project 1 -$200 $75 $75 $75 $190 $190 Project 2 -$650 $250 $250 $125 $125 $125 Which project would you recommend? Explain