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

Question

WACC The Pawson Company's year-end balance sheet is shown below. Its cost of common equity is 17%, its before-tax cost of debt is 12%, 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 $1,105. The firm has 576 shares of common stock outstanding that sell for $4.00 per share Assets Liabilities And Equity Cash $ 120 $ 10 Accounts receivable Inventories Plant and equipment, net Total assets 240 360 2,160 $2,880 Accounts payable and accruals Short-term debt Long-term debt Common equity Total liabilities and equity 45 1,060 1,765 $2,880 Calculate Pawlson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations

Explanation / Answer

WACC = 13.82%

Amount weight cost weight*cost equity                        2,304.00 0.6759 17.0000% 0.1149 debt                        1,105.00 0.3241 7.2000% 0.0233

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