The NavJas Company is a manufacturer of consumer-plastic products, is evaluating its capital structure. As a first step, you have been asked to determine its current weighted average cost of capital (WACC). You have been provided with the following partial balance sheet (in $ thousands): Long-term liabilities Long-term debt ($1,000 face value, 11% coupon) $600,000 Owners' equity Preferred shares ($7.50 par) $375,000 Common shares $400,000 Retained earnings $250,000 Management has also provided the following additional information: NavJas's preferred shares have a current market price of $8 per share and offer a dividend rate of $0.75 per share. The long-term debt consists of a single issue with a remaining term to maturity of seven years and interest paid semi-annually. The current market yield on bonds of comparable risk and maturity is 12.36%. Finally, the beta on NavJas's 75 million outstanding common shares is 1.20; the shares paid a dividend of $0.60 per share last year, which is expected to grow at an average annual rate of 1% for the foreseeable future; and the shares have a current market price of $5 per share. Ignoring flotation costs, NavJas's marginal tax rate is 39%. a) Calculate the NavJas company book and market values of WACC. b) If the company had used the book value of WACC would you expect WACC to be higher or lower than the market value? Out of these two rates (book value and market value), explain which rate is applicable in analyzing the company's projects and why