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Promo Pak has compiled the following financial data: Source of CapitalBook ValueMarket ValueCost Long-term debt$ 8,000,000$ 8,500,0005.0% Preferred stock500,000750,00012.0 Common stock equity9,000,00015,000,00016.0 ------------------------ $17,500,000$24,250,000 a.Calculate
Promo Pak has compiled the following financial data:
Source of CapitalBook ValueMarket ValueCost
Long-term debt$ 8,000,000$ 8,500,0005.0%
Preferred stock500,000750,00012.0
Common stock equity9,000,00015,000,00016.0
------------------------
$17,500,000$24,250,000
a.Calculate the weighted average cost of capital using book value weights.
b.Calculate the weighted average cost of capital using market value weights.
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