The Patrick Company\'s year-end balance sheet is shown below. Its cost of common
ID: 2632043 • Letter: T
Question
The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 15%, its before-tax cost of debt is 11%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick's WACC using market value weights. Round your answer to two decimal places.
Assets.............................. Liabilities And Equity
Cash.........................$ 120
Accounts receivable.......240
Inventories...................360 Long-term debt..............$1,210
Plant and equipment,
net............................2,160 Common equity...............1,670
Total assets...............$2,880 Total liabilities and equity..$2,880
_________%
Explanation / Answer
=[15%(576 X 4) + 11% (1- 40%) (1210)] / (576 X 4 + 1210) = 12.107%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.