The balance sheets for the Genatron Manufacturing Corporation for the years 2013 and 2014 are listed in the text a Calculate the weighted average cost of capital based on book value weights Assume an after tax cost of new debt of 8 63 percent and a cost of common equity of 16 5 percent b The curren...

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The balance sheets for the Genatron Manufacturing Corporation for the years 2013 and 2014 are listed in

Question:

The balance sheets for the Genatron Manufacturing for the years 2013 and 2014 are listed in the text.
a. Calculate the weighted average based on book value weights. Assume an after-tax cost of new debt of 8.63 percent and a cost of common equity of 16.5 percent.
b. The current market value of Genatron’s long-term debt is $350,000. The price is $20 per share and there are 30,000 shares outstanding. Calculate the WACC using market value weights and the component capital costs in Part a.
c. Recalculate the WACC based on both book value and market value weights assuming that the before-tax will be 18 percent, the company is in the 40 percent income tax bracket, and the after-tax cost of common equity capital is 21 percent.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...