Question
The Patrick Companys year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 13%, and its
The Patrick Companys year-end 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 at 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.
Assets:
Cash $130,AR $240,Inventories $360, Plant & equip (net), $2,160. Total assets: $2,890
Liabilities & Equity:
AP and accruals $10, Short term debt $52, Long term debt $1,100, Common equity $1,728. Total liabilities and equity: $2,890
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