WACC The Patrick Company’s year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 13%, and its marginal tax rate is 40%. Assume that the firm’s long-term debt sells at par value. The firm’s total debt, which is the sum of the company’s short-term debt and long-term debt, equals $1,152. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick’s WACC using market-value weights.
Assets | Liabilities and Equity | ||
Cash | $ 130 | Accounts payable and accruals | $ 10 |
Accounts receivable | 240 | Short term debt | 52 |
Inventories | 360 | Long term debt | 1,100 |
Plant and equipment, net | 2,160 | Common equity | 1,1728 |
Total assets | $2,890 | Total liabilities and equity | $2,890 |
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