Webster Company has compiled the information shown in the following table:

Source of capital	Book value		Market value		After-tax cost
Long-term debt	$4,000,000		$4,120,000		8%
Preferred stock	40,000		63,000		12%
Common stock equity	1,060,000		2,788,000		16%
Totals	$5,100,000		$6,971,000

.

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.

(Round to two decimal places.)