P914 WACC: Book weights and market weightsWebster Company has compiled the information shown in the following table.

Source of capital

Book value

Market value

After-tax cost

Long-term debt

$4,000,000

$3,840,000

6.0%

Preferred stock

40,000

60,000

13.0

Common stock equity

1,060,000

3,000,000

17.0

Totals

$5,100,000

$6,900,000

a. Calculate the weighted average cost of capital using book value weights.

b. Calculate the weighted average cost of capital using market value weights.

c. Compare the answers obtained in parts a and b. Explain the differences.

P9-14 WACC: Book weights and market weights Webster Company has compiled the intormation shown in the following table Market value After-tax cost Long debt term Preferred stock 40,000 000,000 $3,840,000 6.0% 60,000 13.0 3,000,000 17.00 Common stock 1,060,000 equity a. Calculate $5,100,000 $6,900,000 b. Calculate the weighted average cost of capital using book value weights. c. Compare the weighted average cost of capital using market value weights. the answers obtained in parts a and b. Explain the differences