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. C. a. The firm's weighted average cost of capital using book value weights is %. (Round to two decimal places.) b. The firm's weighted average cost of capital using market value weights is %. (Round to two decimal places.) c. Compare the answers obtained in parts a and b. Explain the differences. (Select the best answer below.) O A. The market value approach yields a higher cost of capital because the costs of the components of the capital structure are calculated using the prevailing market prices. Since the common stock is selling at a higher value than its book value, the cost of capital is much higher when using the market value weights. OB. The book value approach yields a higher cost of capital because the costs of the components of the capital structure are calculated using the prevailing market prices. Since the common stock is selling at a lower value than its market value, the cost of capital is much higher when using the book value weights. O C. The market value approach yields a lower cost of capital because the costs of the components of the capital structure are calculated using the prevailing market prices. Since the common stock is selling at a lower value than its book value, the cost of capital is much lower when using the market value weights. OD. The book value approach yields a lower cost of capital because the costs of the components of the capital structure are calculated using the prevailing market prices. Since the common stock is selling at a higher value than its market value, the cost of capital is much higher when using the book value weights. (Click on the icon here 2 in order to copy the contents of the data table below into a spreadsheet.) Source of capital Book value Market value After-tax cost Long-term debt $4,000,000 $3,920,000 Preferred stock 40,000 55,000 11% Common stock equity 1,060,000 4.643,000 17% Totals $5,100,000 $8,618,000 7%