9. The Patrick Company's cost of common equity (rs) is 16%, its before-tax cost of debt (ra) is 8%, and its marginal tax rate is 20%. The stock sells at $41 per share and bonds sell at $900 per bond. Assets Cash Account Receivable Inventories $100,000 $300,000 $400,000 Plant and equipment, net $4,200,000 Total assets $5,000,000 Liabilities and Equity Long-term debt (par value=$1000) Common stock (par value=$1) Retained earnings Total liabilities and equity What is Patrick's WACC if it raises capital based on market value capital structure? a. 12.16% b. 14.56% c. 14.27% d. 12.80% e. 13.88% $2,000,000 $200,000 $2,800,000 $5,000,000 the cost of cap
9. The Patrick Company's cost of common equity (rs) is 16%, its before-tax cost of debt (ra) is 8%, and its marginal tax rate is 20%. The stock sells at $41 per share and bonds sell at $900 per bond. Assets Cash Account Receivable Inventories $100,000 $300,000 $400,000 Plant and equipment, net $4,200,000 Total assets $5,000,000 Liabilities and Equity Long-term debt (par value=$1000) Common stock (par value=$1) Retained earnings Total liabilities and equity What is Patrick's WACC if it raises capital based on market value capital structure? a. 12.16% b. 14.56% c. 14.27% d. 12.80% e. 13.88% $2,000,000 $200,000 $2,800,000 $5,000,000 the cost of cap
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:9. The Patrick Company's cost of common equity (rs) is 16%, its before-tax cost of debt (ra) is 8%, and its marginal tax rate
is 20%. The stock sells at $41 per share and bonds sell at $900 per bond.
Assets
Cash
Account Receivable
Inventories
$100,000
$300,000
$400,000
Liabilities and Equity
Long-term debt (par value-$1000)
$2,000,000
Common stock (par value=$1)
$200,000
Retained earnings
$2,800,000
Plant and equipment, net $4,200,000
Total assets
$ 5,000,000
Total liabilities and equity
What is Patrick's WACC if it raises capital based on market value capital structure?
a. 12.16%
$5,000,000
b. 14.56%
c. 14.27%
d. 12.80%
e. 13.88%
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