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You have collected the following information about a company: Source of capital Market value Book value After-tax cost Long-term debt 100,000 100,000 0.08 Preferred stock
You have collected the following information about a company:
| Source of capital | Market value | Book value | After-tax cost |
|---|---|---|---|
| Long-term debt | 100,000 | 100,000 | 0.08 |
| Preferred stock | 60,000 | 72,000 | 0.11 |
| Common stock | 130,000 | 65,000 | 0.16 |
| Total | 290,000 | 237,000 |
1. What is the weighted average cost of capital using market values?
2. What is the weighted average cost of capital using book values?
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International Financial Management
Authors: Cheol Eun, Bruce Resnick
5thEdition
0073382345, 9780073382340
