Book value versus market value components. The CFO of DMI is trying to determine the company's WACC. Brad, a promising MBA, says that the company should use book value to assign the WACC components' percentages. Angela, a long-time employee and experienced financial analyst, says that the company should use market value to assign the components' percentages. The after-tax cost of debt is at 11.9%, the cost of preferred stock is at 15.36%, and the cost of equity is at 20.74%. Calculate the WACC using both the book value and the market value approaches with the information in the popup window: Which do you think is better?

Current assets 33,959 Current liabilities 0 Long-term assets 70,041 Long-term liabilities Bonds payable 61,000 Owners' equity Preferred stock 15,000 Common stock 28,000 Total assets 104,000

Total liabilities and owners' equity 104,000

Current assets 33,959 Current liabilities 0 Long-term assets 70,041 Long-term liabilities Bonds payable 61,000 Owners' equity Preferred stock 15,000 Common stock 28,000 Total assets 104,000 Total liabilities and owners' equity 104,000

Debt Preferred Stock Common Stock Outstanding 61,000 150,000 1,120,000 Market Price 962.42 100.32 38.07