Webster company has compiled the information shown in the following table. Source of Capital Book Value Market

Question:

Webster company has compiled the information shown in the following table. Source of Capital Book Value Market Value After tax cost Long term debt $4,000,000 $3,840,000 6.0% Preferred stock 40,000 60,000 13.0 equity 1,060,000 3,000,000 17.0 TOTALS 5,100,000 6,900,000
A. Calculate the weighted average using book value weights.
B. Calculated the weighted average using market value weights.
C. Compare the answers obtained in parts A and B. Explain the differences.
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