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Calculate the weighted average cost of capital

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Reference no: EM132724581

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

Long-term debt $4,000,000 $3,960,000 0.08%

Preferred stock $40,000 $54,000 0.11%

Common stock equity $1,060,000 $3,689,000 0.15%

Totals $5,100,000 $7,703,000

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: EM132724581

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