dule 5 Homework o Click here to read the eBook An Overview o

dule 5 Homework o Click here to read the eBook: An Overview of the Weighted Average Cost of Capita (WACC) Click here to read the eBook: Basic Definitions 10. The Pawison Company\'s year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 8%, 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 sumcf the company\'s short-term debt and long-term debt, equals $1,189. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. 12. 13. Liabilities And Equity 14. 120 Accounts payable and $10 Cash OAccounts receivable 59 1,130 1,681 240 Short-term debt O Inventories O Plant and equipment, net 2,160 Common equity O Total assets 17 360 Long-term debt 18. 19. 20. aer and$, $2,880 Total $2,880 Calculate Pawlson\'s WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations Check My Work (3 remaining) 03898 4

Solution

WACC= 10.87%

	market value	market value weights	cost	weighted average cost
After tax cost of debt	1189	1189/3493=.34040	8[1-.40] =4.8	4.8*.34040=1.63392
Equity	576*4=2304	2304/3493= .65960	14	14*.65960= 9.2344
	3493
		WACC		10.87%