Cash Accounts Receivable Inventories Net Property, Plant & Equipment $540,000 4,580,000 7,400,000 Long-term Debt 18,955,000 Common Equity $12,590,000 18,885,000 $31,475,000 Total Assets $31,475,000 Cost of debt financing Cost of Tax rate Market to book ratio 15% 34% Solution: Market Value Market Value Pro Product Component Long-term Debt Common E Balance Sheet $12,590,000 18,885,000 $31,475,000 on After-tax Cost B) Long-term Debt Common $12,590,000 28,327,500 $40,917,500