7. The Evanec Company's next expected dividend, D1, is $3.87; its growth rate is 4%;...
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7. The Evanec Company's next expected dividend, D1, is $3.87; its growth rate is 4%; and its common stock now sells for $32.00. New stock (external equity) can be sold to net $27.20 per share.
a. What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places. Rs=?
b. What is Evanec's percentage flotation cost, F? Round your answer to two decimal places. F=?
c. What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. Re=?
8. Palencia Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock. Its before-tax cost of debt is 13%, and its marginal tax rate is 25%. The current stock price is P0 = $26.00. The last dividend was D0 = $2.00, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places.
a. Rs=?
b. WACC=?
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