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A company's cost of common equity is 16%, its before-tax cost of debt is 13%, and its marginal tax rate is 40%. Assume that the
A company's cost of common equity is 16%, its before-tax cost of debt is 13%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick's WACC using market value weights.
Assets | Liabilities & Equity |
Cash $120 | |
Accounts Receivables $240 | |
Inventories $360 | Long-term Debt $1,152 |
Plant and Equip., net $2,160 | Common Equity $1,728 |
Total Assets $2, 880 | Total Liabilities & Equity $2,880 |
The answer is 13.27%
However, I have 12.72%. My equation is WACC=(Market debt weight) x (After-tax cost of debt) + (Market equity weight) x (CAPM cost of Equity) for using market weight values. How do I add stocks into the equation?
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