Question 4

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 25%. 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 $1,160. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Assets

Cash $ 120

Accounts Receivable 240

Inventories 360

Plant and equipment, net 2,160

Total assets 2.880

Liabilities and Equity

Accounts payable anf accruals 10

Short Term debt 60

Long Term debt 1,100

Common equity 1,710

Total Liabilities and equity 2,880

Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations.

Round your answer to two decimal places.