The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 11%, and its marginal tax rate is 25%. Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,126. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Cash Assets $120 $ 10 Accounts receivable 240 56 Inventories 360 1,070 Plant and equipment, net 2,160 1,744 Total assets $2,880 Total liabilities and equity $2,880 Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places. % Liabilities And Equity Accounts payable and accruals Short-term debt Long-term debt Common equity
The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 11%, and its marginal tax rate is 25%. Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,126. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Cash Assets $120 $ 10 Accounts receivable 240 56 Inventories 360 1,070 Plant and equipment, net 2,160 1,744 Total assets $2,880 Total liabilities and equity $2,880 Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places. % Liabilities And Equity Accounts payable and accruals Short-term debt Long-term debt Common equity
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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Transcribed Image Text:The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 11%, and its marginal tax rate is 25%.
Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,126. The
firm has 576 shares of common stock outstanding that sell for $4.00 per share.
Assets
Liabilities And Equity
Accounts payable and accruals
Short-term debt
Long-term debt
Common equity
Cash
$ 120
Accounts receivable
240
360
Inventories
Plant and equipment, net
2,160
Total assets
$2,880
Calculate Paulson's WACC using market-value
%
$ 10
56
1,070
1,744
Total liabilities and equity
$2,880
weights. Do not round intermediate calculations. Round your answer to two decimal places.
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