A.4 ABC Company has on its books the following amounts and specific costs of each type of capital: Type of Book Value Market Value Specific Costs Capital ($) ($) 600,000 1,000,000 800,000 2,000,000 Debt Preference Equity Retained Earnings 480,000 1,100,000 900,000 3,000,000 4,400,000 5,480,000 Determine the weighted average cost of capital using (a)Book Value weights, and (b) Market Value weights (%) 5 8 15 13

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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A.4 ABC Company has on its books the following amounts
and specific costs of each type of capital:
Type of
Book Value
Market Value Specific Costs
Capital
($)
($)
Debt
Preference
Equity
Retained
Earnings
600,000
1,000,000
800,000
2,000,000
480,000
1,100,000
900,000
3,000,000
(a)Book Value weights, and
(b) Market Value weights
(%)
5
4,400,000
5,480,000
Determine the weighted average cost of capital using
8
15
13
Transcribed Image Text:A.4 ABC Company has on its books the following amounts and specific costs of each type of capital: Type of Book Value Market Value Specific Costs Capital ($) ($) Debt Preference Equity Retained Earnings 600,000 1,000,000 800,000 2,000,000 480,000 1,100,000 900,000 3,000,000 (a)Book Value weights, and (b) Market Value weights (%) 5 4,400,000 5,480,000 Determine the weighted average cost of capital using 8 15 13
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