Calculate the weighted average cost of capital

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Reference no: EM132085463

Question: Webster Company has compiled the information shown in the following? table:

Source of capital Book value Market value After-tax cost

Long-term debt: $4,000,000 $4,080,000 0.09%

Preferred stock: $40,000 $65,000 0.13%

Common stock equity: $1,060,000 $3,487,000 0.18%

Totals: $5,100,000 $7,632,000

a. Calculate the weighted average 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.

Reference no: EM132085463

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