Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Excel Online Structured Activity: WACC The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Excel Online Structured Activity: WACC The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 9%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short term debt and long-term debt, equals $1,132. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Calculate Paulson's WACC using market value weights. Round your answer to two decimal places. Do not round your intermediate calculations. Assets Llabilities And Equity Cash $ 120 Accounts payable and accruals $ 10 Accounts receivable 240 62 Short-term debt Long-term debt Inventories 360 $1,070 Plant and equipment, net 2,160 Common equity 1,738 Total assets $2,880 Total liabilities and equity $2,880 H von 14.00% 9.00% 40.00% 576 $4.00 Yes 1 WACC 2 3 Cost of common equity (r.) 4 Before-tax cost of debt (ra) 5 Marginal tax rate (T) 6 Common shares outstanding 7 Current stock price 8 Long-term debt sells at par value 9 10 Balance Sheet: Assets 12 Cash 13 Account receivable 14 Inventories 15 Plant and equipment, net 16 Total assets 17 18 19 Market value of total debt 20 Market value of common equity 21 Total capital 22 23 Percentage of debt -4 Percentage of common equity $120.00 $240.00 $360.00 $2,160.00 $2,880.00 Liabilities and Equity Accounts payable and accruals Short-term debt Long-term debt Common equity Total liabilities and equity $10.00 $62.00 $1,070.00 $1,738.00 $2,880.00 Formulas #N/A #N/A #N/A #N/A #N/A F G H B NO.00 $2,160.00 $2,880.00 D LUTYTTITUDU Common equity Total liabilities and equity E 1.UU.UU $1,738.00 $2,880.00 HTVUITORIOS 5 Plant and equipment, net 6 Total assets 7 3 Market value of total debt Market value of common equity Total capital Formulas #N/A #N/A #N/A Percentage of debt Percentage of common equity #NA #N/A After-tax cost of debt #N/A Weighted Average Cost of Capital (WACC) #N/A

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions