WACC—Book weights and market weights 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 4,080,000 8% Preferred-stock $40,000 $66,000 12% Common-stock-equity $1,060,000 $3,784,000 18% Totals $5,100,000 $7,930,000
A. Calculate the weighted average cost of capital usig book value
B. Calculate the weighted average cost of capital using market value
c. Compare the answers obtained in parts a and b. Explain the differences.
a. The firms weighted average cost of capital using book value weights is ___%
b. The Firms weighted average cost of capital using market value weights is ___%
C. Compare the answers obtained in parts a and b