# Weighted Average Cost of Capital (WACC)

4. (P10-9) WACC The Patrick Company's cost of common equity is 16 percent, its before-tax cost of debt is 13 percent, and its marginal tax rate is 40 percent. The stock sells at book value. Using the following balance sheet, calculate Patrick's WACC.

Assets

Cash $120

Accounts receivable 240

Inventories 360

Plant and Equipment, net 2,160

Total assets $2,880

Liabilities

Long Term Debt $1,152

Common Equity $1,728

Total liability & equity $2,880

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4.Â Â (P10-9) WACC The Patrick Company's cost of common equity is 16 percent, its before-tax cost of debt is 13 percent, and its marginal tax rate is 40 percent. The stock sells at book value. Using the following balance sheet, calculate Patrick's WACC.

Assets

Cash ...

#### Solution Summary

A weighted average cost of capital is calculated.