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Book value versus market value components. Compare Trout, Inc. with Salmon Enterprises, using the balance sheet of Trout and the market data of Salmon for the weights in the weighted average cost of capital: E. If the after-tax cost of debt is 8.8% for both companies and the cost of equity is 15.21%, which company has the higher WACC? What is the book value adjusted WACC for Trout, Inc.? % (Round to two decimal places.) 1 Data Table Click on the Icon in order to copy its content into a spreadsheet. Trout, Inc. Current assets: $1,111,111 Current liabilities: $535,534 Long-term assets: $3,888,889 Long-term liabilities: $3,123,328 Total assets: $5,000,000 Owners' equity: $1,341,138 Salmon Enterprises Bonds outstanding: 3,000 selling at $1,000.35 Common stock outstanding: 260,000 selling at $34.29

Book value versus market value components. Compare Trout, Inc. with Salmon Enterprises, using the balance sheet of Trout and the market data of Salmon for the weights in the weighted average cost of capital: E. If the after-tax cost of debt is 8.8% for both companies and the cost of equity is 15.21%, which company has the higher WACC? What is the book value adjusted WACC for Trout, Inc.? % (Round to two decimal places.) 1 Data Table Click on the Icon in order to copy its content into a spreadsheet. Trout, Inc. Current assets: $1,111,111 Current liabilities: $535,534 Long-term assets: $3,888,889 Long-term liabilities: $3,123,328 Total assets: $5,000,000 Owners' equity: $1,341,138 Salmon Enterprises Bonds outstanding: 3,000 selling at $1,000.35 Common stock outstanding: 260,000 selling at $34.29

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Chapter 11, Question 5

**Title: Comparative Analysis of Weighted Average Cost of Capital (WACC)** **Book Value versus Market Value Components:** This exercise involves comparing the WACC for Trout, Inc. and Salmon Enterprises. You are provided with the balance sheet data for Trout, Inc. and market data for Salmon Enterprises to determine the weights used in the WACC computation. **Question**: If the after-tax cost of debt is 8.8% for both companies and the cost of equity is 15.21%, which company has the higher WACC? **Objective**: Calculate the book value adjusted WACC for Trout, Inc. **Instructions**: Round your answer to two decimal places. --- **Data Table**: *Click on the icon to copy its content into a spreadsheet.* **Trout, Inc.**: - **Current Assets**: $1,111,111 - **Long-term Assets**: $3,888,889 - **Total Assets**: $5,000,000 - **Current Liabilities**: $535,534 - **Long-term Liabilities**: $3,123,328 - **Owner's Equity**: $1,341,138 **Salmon Enterprises**: - **Bonds Outstanding**: 3,000 selling at $1,000.35 each - **Common Stock Outstanding**: 260,000 selling at $34.29 each This information is essential for conducting a thorough WACC analysis, considering both book value and market value components.
Transcribed Image Text:**Title: Comparative Analysis of Weighted Average Cost of Capital (WACC)** **Book Value versus Market Value Components:** This exercise involves comparing the WACC for Trout, Inc. and Salmon Enterprises. You are provided with the balance sheet data for Trout, Inc. and market data for Salmon Enterprises to determine the weights used in the WACC computation. **Question**: If the after-tax cost of debt is 8.8% for both companies and the cost of equity is 15.21%, which company has the higher WACC? **Objective**: Calculate the book value adjusted WACC for Trout, Inc. **Instructions**: Round your answer to two decimal places. --- **Data Table**: *Click on the icon to copy its content into a spreadsheet.* **Trout, Inc.**: - **Current Assets**: $1,111,111 - **Long-term Assets**: $3,888,889 - **Total Assets**: $5,000,000 - **Current Liabilities**: $535,534 - **Long-term Liabilities**: $3,123,328 - **Owner's Equity**: $1,341,138 **Salmon Enterprises**: - **Bonds Outstanding**: 3,000 selling at $1,000.35 each - **Common Stock Outstanding**: 260,000 selling at $34.29 each This information is essential for conducting a thorough WACC analysis, considering both book value and market value components.
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