WACC-Market value weights The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table: a. Calculate the firm's weighted average cost of capital. b. Explain how the firm can use this cost in the investment decision-making process. a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost $700,000 $30,000 $600,000 Long-term debt 6.2% Preferred stock 11.9% Common stock equity 16.5% Print Done

WACC-Market value weights The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table: a. Calculate the firm's weighted average cost of capital. b. Explain how the firm can use this cost in the investment decision-making process. a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost $700,000 $30,000 $600,000 Long-term debt 6.2% Preferred stock 11.9% Common stock equity 16.5% Print Done

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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Webster Company has compiled the information shown in the following table attached: . a. Calculate the weighted average cost of capital using book value weights. b. Calculate the weighted average cost of capital using market value weights. c. Compare the answers obtained in parts a and b. Explain the differences.
The followings are the instructions for this case. Provide the excel file where the computations are done. GIVE ANSWERS PLEASE. I WILL UPVOTE! You have to use the following equation: WACC = Wd*Rd*(1-t)+We*Re. Where WACC stands for the Weighed average cost of capital, Wd is the weight of debt in the capital could be either market value weight or book value weight and it is calculated in the following way: Wd=D/(E+D), where D is either the book value of debt or the market value of debt, E is the book value of equity or the market value of equity. So keep in mind if you want Wd on book value basis, then both E and D must be on book value basis, if you want Wd on a market value basis, then both E and D must be on market value basis. Rd is the cost of debt (percentage cost of debt), t is the tax rate, We is the weight of equity in the capital could be either market value weight or book value weight, We = E/(E+D), as I explained Wd, it could be either on a book value or book value basis. Re…
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The followings are the instructions for this case. Provide the excel file where the computations are done. You have to use the following equation: WACC = Wd*Rd*(1-t)+We*Re. Where WACC stands for the Weighed average cost of capital, Wd is the weight of debt in the capital could be either market value weight or book value weight and it is calculated in the following way: Wd=D/(E+D), where D is either the book value of debt or the market value of debt, E is the book value of equity or the market value of equity. So keep in mind if you want Wd on book value basis, then both E and D must be on book value basis, if you want Wd on a market value basis, then both E and D must be on market value basis. Rd is the cost of debt (percentage cost of debt), t is the tax rate, We is the weight of equity in the capital could be either market value weight or book value weight, We = E/(E+D), as I explained Wd, it could be either on a book value or book value basis. Re is the cost of equity. Q1: you have…
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