Ask Experts Questions for FREE Help !
Ask
    princessfinance's Avatar
    princessfinance Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Sep 14, 2011, 11:06 AM
    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
    Kcarter4's Avatar
    Kcarter4 Posts: 1, Reputation: 1
    New Member
    		  
    #2

    Jan 30, 2013, 10:01 AM
    WACC = wdrd(1 – T) + wcrs = 0.4(0.13)(0.6) + 0.6(0.16)
    = 0.0312 + 0.0960 = 12.72%.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Cost of debt vs.cost of equity [ 2 Answers ]

Simply put, in the WACC why is it that the cost of debt is always assumed to be lower then the cost of equity even before tax.

Cost of Debt vs Cost of Equity [ 1 Answers ]

What is cheaper Cost of Equity or Cost of Debt ?

Calculating the after-tax cost of new debt and common equity [ 0 Answers ]

Here is the problem. How do I go about calculating the after-tax cost of new debt and common equity. Calculate the cost of equity and calculate weighted cost of capital. I am really confused on this. The following tabulation gives earnings per share figures for the Foust Company during the...

View more questions Search