FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 $1,203. The firm has 576 shares of
common stock outstanding that sell for $4.00 per share.
Assets
Cash
Accounts receivable
Inventories
Plant and equipment, net
Total assets
$120
240
360
2,160
$2,880
Calculate Paulson's WACC using market-value
Liabilities And Equity
Accounts payable and accruals
Short-term debt
$10
63
Long-term debt
1,140
Common equity
1,667
Total liabilities and equity
$2,880
weights. Do not round intermediate calculations. Round your answer to two decimal places.
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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 $1,203. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Assets Cash Accounts receivable Inventories Plant and equipment, net Total assets $120 240 360 2,160 $2,880 Calculate Paulson's WACC using market-value Liabilities And Equity Accounts payable and accruals Short-term debt $10 63 Long-term debt 1,140 Common equity 1,667 Total liabilities and equity $2,880 weights. Do not round intermediate calculations. Round your answer to two decimal places.
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