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WACC: Book weights and market weights Webster Company has compiled the information shown in the following...

WACC: Book weights and market weights Webster Company has compiled the information shown in the following table.

Source of capitalBook valueMarket valueAfter-tax costLong-term debt$4,000,000$3,840,0006.0%Preferred stock40,00060,00013.0Common stock equity 1,060,000 3,000,00017.0Totals$5,100,000$6,900,000

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Answer #1
Book Value Weighted Cost
(a) Long-Term Debt $4,000,000 78.43% 6% 4.71%
Preferred Stock $40,000 0.78% 13% 0.10%
Common Stock $1,060,000 20.78% 17% 3.53%
$5,100,000 WACC 8.34%
(b) Market value Weighted Cost
Long-Term Debt $3,840,000 55.65% 6% 3.34%
Preferred Stock $60,000 0.87% 13% 0.11%
Common Stock $3,000,000 43.48% 17% 7.39%
$6,900,000 WACC 10.84%
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