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-   -   The Patrick Company's cost of common equity is 16%, its before-tax cost of debt is 13 (https://www.askmehelpdesk.com/showthread.php?t=597241)

  • Sep 14, 2011, 11:06 AM
    princessfinance
    The Patrick Company's cost of common equity is 16%, its before-tax cost of debt is 13
    10-9 WACC. The Patrick Company's cost of common equity is 16%, its before-tax cost of debt is 13%, and its marginal tax rate is 40%. The stock sells at book value. Using the following balance sheet, calculate Patrick's WACC.
    Assets Liabilities and Equity
    Cash $ 120
    Accounts receivable 240
    Inventories 360 Long term debt $ 1,152
    Plant and equipment, net 2,160 Common equity 1,728
    Total assets 2,880 Total liabilities and equity 2,880
  • Jan 30, 2013, 10:01 AM
    Kcarter4
    WACC = wdrd(1 – T) + wcrs = 0.4(0.13)(0.6) + 0.6(0.16)
    = 0.0312 + 0.0960 = 12.72%.

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