Problem 10-8 Cost of Common Equity and WACC 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 40%. The current stock price is Po = $30.50. The last dividend was Do = $2.75, and it is expected to grow at a 8% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places. Do not round your intermediate calculations. a. rs = 17.74 b. WACC = 13.64 Hide Feedback