WACC long dash Book weights and market weights Webster Company has compiled the information shown...
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WACC long dash Book weights and market weights
Webster Company has compiled the information shown in the following table:
a.Calculate the weighted average 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.
| Source of capital | Book value | Market value | After-tax cost |
| Long-term debt | $4,000,000 | $4,200,000 | 9% |
| Preferred Stock | $40,000 | $55,000 | 11% |
| Common Stock Equity | $1,060,000 | $4,039,000 | 17% |
| Totals | $5,100,000 | $8,294,000 |
.The firm's weighted average cost of capital using book value weights is ?%. (Round to two decimal places.) (Show all parts)
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