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    Assets Liabilities And Equity

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    WACC The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 13%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm has 576 shares of common stock outstanding that sell for $4.00. Calculate Patrick's WACC using market value weights.

    Assets Liabilities and Equity

    Cash: $ 120
    Accounts receivable: 240
    Inventories: 360
    Long-term debt: $1,152
    Plant and equipment: 2,160
    Common equity: 1,728

    Total assets: $2,880
    Total liabilities: $2,880

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    Solution Preview

    Total sharevalue = 576*4= 2304

    Total market value = 2304+1152= ...

    Solution Summary

    The solution provides a classic example to compute WACC using market value weights.

    $2.19