WACC—Book weights and market weights
Webster Company has compiled the information shown in the following? table:
Long-term_debt $4,000,000 $4,040,000 0.07%
Preferred_stock $40,000 $54,000 0.13%
Common_stock_equity $1,060,000 $3,000,000 0.16%
Totals $5,100,000 $7,094,000 *
a. Calculate the weighted aOKverage cost of capital using book value
weights.
b. Calculate the weighted average cost of capital using market value
weights.
c. Compare the answers obtained in parts a and b. Explain the differences.
Round to two decimal places