ch 11 question 6

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 9.5%, the cost of preferred stock is at 12.71%, and the cost of equity is at 17.75%Calculate the WACC using both the book value and the market value approaches with the information in the popup windowWhich do you think is better ?

Click on the Icon in order to copy its content into a spreadsheet. Market Information