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I worked out this problem. Just need to know whether the solution and steps are correct. P9-13 WACC: Market value weights The market values and
I worked out this problem. Just need to know whether the solution and steps are correct.
P9-13 WACC: Market value weights The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table. Market value Source of capital Long-term debt Preferred stock Individual cost $700,000 50,000 650,000 5.3% 12.0 Common stock equity 16.0 A. Calculate the firm's WACC. Computation of total book value= $700,000 + $50,000 + $650,000 = $1,400,000 WC-2000 0531.30000 0-121 68196800 1010 $700,000 $1,400,00020.053+ $650,000 $1,400,000 WACC = |( 400,000 )20.12 | + :0.16 o WACC 0.0265 0.004285+ 0.0742850.10507 WACC 0.10507 or 10.51%
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