3. You are a new financial analyst working for a company that’s more than 100 years old. The CFO has asked you and a young member of the accounting staff to work together in reviewing the firm’s capital structure for the purpose of recalculating its cost of capital. As you both leave the CFO’s office, your accounting colleague says this job is really going to be easy because he already has the information. In preparing the latest annual report, he worked on the capital section of the balance sheet and has the values of debt, preferred stock, and equity at his fingertips.

He says the two of you can summarize these into a report in five minutes and then go out for a beer. How do you react and why? Is the fact that the firm is quite old relevant? Why?