eBook

Palencia Paints Corporation has a target capital structure of 45% debt and 55% 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 P₀ = $21.50. The last dividend was D₀ = $2.25, and it is expected to grow at a 6% 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 = %