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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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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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Chapter
Section
Chapter 10, Problem 9P
Textbook Problem

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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