WACC

The Paulson 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 firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,167. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Paulson's WACC using market-value weights.

Assets

Cash $120

Accounts Receivable 240

Inventories 360

Plant and equipment, net 2,160

Total assets $2,880

Liabilities and Equity

Accounts Payable and accruals $10

Short-term debt 47

Long-term debt 1,120

Common Equity 1,703

Total liabilities and equity $2,880