To calculate the WACC let's go back to the Paley Products, Inc. financial statements for 2016 on p. 300 of the text. Paley has a pre-tax cost of debt of 5%, a cost of equity of 9.8%,10,000 shares outstanding at a market price of $129.08 each and a tax rate of 35%:

1. What are the weights of debt (all debt, the Bank Notes and the Mortgage) and equity for Paley?

Paley Products, Inc. Forecast Balance Sheet Actual 2016 Cash 5 20.400 Accounts Receivable 388.000 Inventory 826.200 Current Assets 51.1 34,600 Gross Book Value $326,300 Accumulated Depreciation (505,800) Net Book Value 230.500 Total Assets 51.461100 Bank Notes 5 286,000 Accounts Payable 306,000 Accruals 77.500 Current Liabilities $ 669.500 Mortgage 36,700 Common Stock 365,000 Retained Earnings 393.900 Liabilities + Equity $1,465,100