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 usingmarket-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
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 usingmarket-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
Chapter12: Capital Structure
Section: Chapter Questions
Problem 2PROB
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WACC The Patrick Company’s year-end balance sheet is shown below. Its
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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