The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 18%, its before-tax cost of debt is 10%, 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 $1,154. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.Assets Liabilities And EquityCash$ 120 Accounts payable and accruals$ 10Accounts receivable240 Short-term debt44Inventories360 Long-term debt1,110Plant and equipment, net2,160 Common equity1,716Total assets$2,880 Total liabilities and equity$2,880Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places. %

Market value of equity :— It is calculated by multiplying market price per share with number of…

Answered: The Paulson Company's year-end balance…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 18%, its before-tax cost of debt is 10%, 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 $1,154. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Assets		Liabilities And Equity
Cash	$ 120		Accounts payable and accruals	$ 10
Accounts receivable	240		Short-term debt	44
Inventories	360		Long-term debt	1,110
Plant and equipment, net	2,160		Common equity	1,716
Total assets	$2,880		Total liabilities and equity	$2,880