WACC The Patrick Company\'s year-end balance sheet is shown below. Its cost of c

Question

WACC The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 18%, 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’s total debt, which is the sum of the company’s short-term debt and long-term debt, equals $1,134. 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 payable and accruals $ 10 Accounts receivable 240 Short-term debt 54 Inventories 360 Long-term debt $1,080 Plant and equipment, net 2,160 Common equity 1,736 Total assets $2,880 Total liabilities and equity $2,880

Explanation / Answer

cost tax rate weight equity( market value) 2304 18% 0.123 +2304/3384*18% Debt 1080 11% 40% 0.021 1080/3384*11%*(1-40%) total 3384 14.36% WACC

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