explain why we did not include Common Equity and Retained Earnings into the amount of total equity for the WACC calculation.

Exhibit 1 Worldwide Paper Company Cost-of-Capital Information Bank loan rates (LIBOR) 1-year 1.15% Interest Rates: January 15, 2016 Market risk premium Historical average 6.0% Government bonds 1-year 0.49% 5-year 1.46% 10-year 2.04% 30-year 2.82% Corporate bonds (10-year maturities) 2.45% 3.38% A 3.85% Baa 5.05% Worldwide Paper Financial Data Balance-sheet accounts (in millions of dollars) Bank loan payable (LIBOR + 1%) Long-term debt Common equity Retained earnings 500 2,500 500 2,000 Per-share data Shares outstanding (millions) Book value per share Recent market value per share 500 $ 5.00 $24.00 Other Bond rating Beta 1.10