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The case of Purple Lemon Shipbuilders The CFO of Purple Lemon Shipbuilders is trying to determine the company's WACC. He has determined that the company's
The case of Purple Lemon Shipbuilders The CFO of Purple Lemon Shipbuilders is trying to determine the company's WACC. He has determined that the company's before-tax cost of debt is 11.10%. The company currently has $100,000 of debt, and the CFO believes that the book value of the company's debt is a good approximation for the market value of the company's debt. - The firm's cost of preferred stock is 12.20%, and the book value of preferred stock is $10,500. - Its cost of equity is 14.70%, and the company currently has $85,000 of common equity on its balance sheet. - The CFO has estimated that the firm's market value of preferred stock is $30,000, and the market value of its common equity is $140,000. If Purple Lemon is subject to a tax rate of 40%, Purple Lemon Shipbulders's WACC is (Hint: Round your answer to two decimal places.)
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