8. Problem 10.08 (Cost of Common Equity and WACC)

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Palencia Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. Its before-tax cost of debt is 10%, and its marginal tax rate is 25%. The current stock price is P₀ = $25.50. The last dividend was D₀ = $2.25, and it is expected to grow at a 7% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places.

r_s = %

WACC = %