capital structure. How signal 13 C UMUT 6. A relatively young firm has capital components valued at book and market and market component costs as follows. No new securities have been issued since the firm was originally capitalized. Value Component Market Book Cost Debt $42,830 $40,000 8.5% Preferred stock 10,650 10,000 10.6 Common equity 65,740 32,000 25.3 a. Calculate the firm's capital structures and WACCs based on both book and market values, ar compare the two b. What appears to have happened to interest rates since the company was started? c. Does the firm seem to be successful? Why? d. What would be the implication of using a WACC based on book as opposed to m In other words, what kinds of mistakes might management make by using the boor 7 Five years ago Heminawa... as opposed to market values? e by using the book values? coup