The Patrick Companys

The Patricks companys yearend balance sheet is shown below. Its cost of common equity is 16%, its before tax cost of debt is 13%, and its marginal tax rate is 40%. Assume that the firms long-term debt sells par value. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1,152. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patricks WACC using market-value weights.

ASSET Liabilities, and Equity

Cash $130 Acc. payable and accruals $10

Accounts receivable 240 Short-term debt $52

Inventories 360 Long-term debt $1,100

Plant and equipment, net 2,160 Common equity 1.728

Total assets 2,890 Total liabilities and equity $2,890