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Find weighted average cost of capital by book value weights

Weighted Average Cost of Capital. Valie Enterprises, Inc., has compiled the following investments:

Type of Capital	Book Value	Market Value	After-Tax Cost
Long-term debt	$3,000,000	$2,800,000	4.8%
Preferred stock	102,000	150,000	9.0%
Common stock	1,108,000	2,500,000	13.0%
	$4,210,000	$5,450,000

(a) Calculate the weighted average cost of capital, using (1) book value weights and (2) market value weights. (b) Explain the difference in the results obtained in (a).

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Find weighted average cost of capital by book value weights

Reference No:- TGS0678623

Have a Question? (oR Write a Review)

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Find weighted average cost of capital by book value weights

Reference No:- TGS0678623

Recent Questions Asked Finance Basics

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