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Calculate jbe weighted-average-cost-of-capital using book

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Reference no: EM132506572

WACC - Book Weights and Market

JB Entertainment, Inc.'s capital structure is as follows.

Source                         Book Value                                Market Value                      After-tax Cost
Long-term debt                   $5,000,000                  $4,500,000                       5.2%
Preferred stock                    $100,000                     $120,000                          11.0%
Common stock                   $4,900,000                       $7,000,000                    14.0%
Totals                            $10,000,000                       $11,620,000

Question a. Calculate JBE's weighted-average-cost-of-capital using book value weights.

Question b. Calculate JBE's weighted-average-cost-of-capital using market value weights.

Question c. Compare your answers in parts A and B. Explain the differences.

Reference no: EM132506572

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