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 8%, and its marginal tax rate is 40%. the current stock price is p0 5 $22.00. the last dividend was d0 5 $2.25, and it is expected to grow at a 5% constant rate. what is its cost of common equity and its wacc?

Cost of common equity is 15.7%  and WACC is 7.2%

Explanation:

D1 is  

D1= 2.25 (1+0.05)

The cost of common equity is  

Rs = 2.36/ 22.00 + 5% =0.157= 15.7%

The cost of common equity is weighted average cost of capital (WACC)  

WACC = (0.35) * (0.08) (1- 0.40) + 0 preferred stock+ (0.35) * (0.157)

WACC = 0.03 *0.6 + 0 + 0.054

WACC = 0.018 + 0.054

WACC = 7.2%

no i will dont mark is joking

we will subscribe.what is ur channels name

answer; // there are violations that can cause injuries or death;