Waccmdashbook weights and market weightswebster company has, Ask an Expert

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WACC—Book weights and market weights

Webster Company has compiled the information shown in the following? table:

Long-term_debt $4,000,000 $4,040,000 0.07%

Preferred_stock $40,000 $54,000 0.13%

Common_stock_equity $1,060,000 $3,000,000 0.16%

Totals $5,100,000 $7,094,000 *

a. Calculate the weighted aOKverage cost of capital using book value

weights.

b. Calculate the weighted average cost of capital using market value

weights.

c. Compare the answers obtained in parts a and b. Explain the differences.

Round to two decimal places

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92101990

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