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A Company has compiled the information shown in the followingtable: Long-term debt $4,000,000 $3,960,000 0.08% Preferred stock $40,000 $54,000 0.11% Common stock equity $1,060,000 $3,689,000
A Company has compiled the information shown in the followingtable:
Long-term debt $4,000,000 $3,960,000 0.08%
Preferred stock $40,000 $54,000 0.11%
Common stock equity $1,060,000 $3,689,000 0.15%
Totals $5,100,000 $7,703,000
- Calculate the weighted average cost of capital using book value weights.
- Calculate the weighted average cost of capital using market value weights.
- Compare the answers obtained in parts a and b. Explain the differences.
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