Problem 13-6 A relatively young firm has capital components valued at book and market and market component costs as follows. No new securities have been issued since the form was originally capitalized alue Component Market Book Cost Debt $42830 $40000 8.5% Preferred Stock 10650 10000 10.4% Common Equity 65740 32000 25.7% a. Calculate the firm's capital structures and WACCs based on both book and market values. Round the answers to two decimal places. Enter the weights in whole numbers and not in percentages. Do not round your intermediate calculations. Market Weights Book Weights Debt Preferred Stock Common Equity Total WACC Compare the two WACCs based on both book and market values. The overall cost of capital has risen due to the net impact of a large increase in the value of the firm's b. What appears to have happened to interest rates since the company was started? Interest rates appear to have since the market values of debt and preferred exceed their original values. Compare the two WACC based on both book and market values The overall cost of capital has risen due to the net impact of a large increase in the value of the firm's b. What appears to have happened to interest rates since the company was started? Interest rates appear to have since the market values of debt and preferred exceed their original values. c. Does the firm seem to be successful? Why? This could be due to an) in stock price or a accumulation of retained earnings or a combination of both d. What should be the implication of using a WACC based on book as opposed to market values? In other words, what kind of mistakes might management make by using the book values? Using the book based WACC might lead to accepting projects that achieve the expectations investors have for the company's return Check My Work Next > Assignment score: 0.0% Email Instructor Save and Exit Submit Assignment for Grading