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 11%, and its marginal tax rate is 40%. The current stock price is P0 = $30.00. The last dividend was D0 = $3.00, and it is expected to grow at a 6% 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.
cost of common equity=(D1/Current price)+Growth rate
=(3*1.06)/30+0.06
=16.6%
After-tax cost of debt=11*(1-tax rate)
=11*(1-0.4)=6.6%
WACC=Respective costs*Respective weight
=(16.6*0.75)+(0.25*6.6)
=14.1%
Palencia Paints Corporation has a target capital structure of 25% debt and 75% common equity, with...
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 = $26.50. The last dividend was D0 = $2.25, and it is expected to grow at an 8% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal...
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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 11%, and its marginal tax rate is 25%. The current stock price is P0 = $33.00. The last dividend was D0 = $3.25, and it is expected to grow at a 4% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal...
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 9%, and its marginal tax rate is 40%. The current stock price is P0 = $26.00. The last dividend was D0 = $2.75, and it is expected to grow at a 6% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places. Do not round your...
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