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WACC Book weights and market weights Webster Company has compiled the information shown in the following table: a. Calculate the weighted average cost of capital
WACCBook weights and market weights
Webster Company has compiled the information shown in the following table:
a.Calculate the weighted average cost of capital using book value weights.
b.Calculate the weighted average cost of capital using market value weights.
c.Compare the answers obtained in parts a and b. Explain the differences.
Source of capital Long-term debt Book value $4,000,000$3,880,000 Market value After-tax cost 40,000 Common stock equity 1,060,000 63,000 3,106,000 $5, 100,000 7049000 6% 11% 18% Preferred stock TotalsStep by Step Solution
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