Problem: WACC
The Pawlson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 9%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,092. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Pawlson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations.
| Assets |
|
Liabilities And Equity |
| Cash |
$ 120 |
|
Accounts payable and accruals |
$ 10 |
| Accounts receivable |
240 |
|
Short-term debt |
42 |
| Inventories |
360 |
|
Long-term debt |
$1,050 |
| Plant and equipment, net |
2,160 |
|
Common equity |
1,778 |
| Total assets |
$2,880 |
|
Total liabilities and equity |
$2,880 |