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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
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 Preferred stock Common stock equity Totals Book value $4,000,000 40,000 1,060,000 $5,100,000 Market value $3,960,000 57,000 4,261,000 $8,278,000 After-tax cost 8% 11% 18%
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