Question: Webster Company has compiled the information shown in the following table. a. Calculate the weighted average cost of capital using book value weights. b. Calculate

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

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 thedifferences.

Source of capital Long-term debt Preferred stock Common stock equity Book valuc in $4,000,000 $3,840,000 60,000 3,000.000 Market valuc Aftcr-tax cost 40,000 1.060000 6.0% 13.0 17.0 55100,000 6,900,000 Totals

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