The CFO of DMI is trying to determine the company€™s WACC. Brad, a promising MBA, says that the company should use book value to assign the components percentage for the WACC. Angela, a long-time employee and experienced financial analyst, says the company should use market value to assign the components. The after-tax cost of debt is at 7%, the cost of preferred stock is at 11%, and the cost of equity is at 14%. Calculate the WACC using both the book value and market value approaches with the following information. Which do you think is better?Why?

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DMI Company Balance Sheet (In thousands) Current Assets S32,000 Current Liabilities S 0 Long-Term Assets 66,000 Long-Tem Liabilities Bonds Payable $54,000 Owner's Equity Preferred Stock S12,000 S32.000 $98.000 Common Stock Total Assets $98,000 Total L & OE Market Information Debt 54,000 S1085 Preferred Stock 120.000 S95.40 Common Stock 1,280,000 S32.16 Outstanding Market Price