Question
WACC The Paulson Companys year-end balance sheet is shown here. Its cost of common equity is 14%, its before-tax cost of debt is 10%, and
WACC The Paulson Companys year-end balance sheet is shown here. Its cost of common equity is 14%, its before-tax cost of debt is 10%, and its marginal tax rate is 25%. 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 $1,167. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Paulsons WACC using market-value weights. 10-510-6Intermediate Problems 6-1310-710-810-9Liabilities and EquityAccounts payable and accruals $ 10Short-term debt 47Long-term debt 1,120Common equity1,703Total liabilities and equity $2,880AssetsCash $ 120Accounts receivable 240Inventories 360Plant and equipment, net2,160Total assets $2,880
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