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Need help with calculating cost of common equity. Patton Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no
Need help with calculating cost of common equity.
Patton 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 11% and its marginal tax rate is 40%. The current stock price is P_0 = $29.50. The last dividend was D_0 = $2.25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places. a. r_s = % b. WACC = %Step by Step Solution
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