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Part $1$

WACClong dashBook weights and market weights$$Webster Company has compiled the information shown in the following$$ table:

Long$-$term debt $$4,000,000$ $$3,840,0000\mathrm{.}06\%$

Preferred stock $$40,000$ $$60,0000\mathrm{.}13\%$

Common stock equity $$1,060,000$ $$3,000,0000\mathrm{.}17\%$

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.