Question
The Pawlson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 10%, and its
The Pawlson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's 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 $1,202. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.
Assets | Liabilities And Equity | |||
Cash | $ 120 | Accounts payable and accruals | $ 10 | |
Accounts receivable | 240 | Short-term debt | 52 | |
Inventories | 360 | Long-term debt | 1,150 | |
Plant and equipment, net | 2,160 | Common equity | 1,668 | |
Total assets | $2,880 | Total liabilities and equity | $2,880 |
Calculate Pawlson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations. %
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