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

Long-term debt $4,000,000 (Book value), $3,920,000 (market value), 0.06% (after-tax cost),

Preferred stock $40,000 (Book value), $59,000 (market value), 0.12% (after-tax cost),

Common stock equity $1,060,000 (Book value), $4,516,000 (market value), 0.16% (after-tax cost),

Totals $5,100,000 (Book value), $8,495,000 (market value),

.

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.