Calculate the weighted average cost of capital using book

Question

Promo Pak has compiled the following financial data:

Source of Capital               Book Value      Market Value     Cost

Long-term debt                $ 8,000,000     $ 8,500,000          5.0%

Preferred stock                       500,000            750,000         12.0

Common stock equity          9,000,000      15,000,000         16.0

                                            ------------         ------------

                                          $17,500,000    $24,250,000

a. Calculate the weighted average cost of capital using book value weights.

b. Calculate the weighted average cost of capital using market value weights.