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

a. Calculate the weighted average cost of capital using hook value weights.

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

Data Table

Transcribed Image Text:

Source of capital Long-term debt Preferred stock Common stock equity Totals Book value $4,000,000 40,000 1,060,000 $5,100,000 Market value $3,960,000 58,000 3,890,000 $7,908,000 After-tax cost 8% 11% 17% Source of capital Long-term debt Preferred stock Common stock equity Totals Book value $4,000,000 40,000 1,060,000 $5,100,000 Market value $3,960,000 58,000 3,890,000 $7,908,000 After-tax cost 8% 11% 17%

Answer rating: 100% (QA)

WACC W e K e W p K p W d k d Where W e Proportion of Equity W p Proportion of Preferenc... View the full answer