WACC
The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 17%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firmâs total debt, which is the sum of the companyâs short-term debt and long-term debt, equals $1,205. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick's WACC using market value weights. Round your answer to two decimal places. answer in percentage and round at the end to two decimal places
Assets Liabilities And Equity Cash $ 120 Accounts payable and accruals $ 10 Accounts receivable 240 Short-term debt 55 Inventories 360 Long-term debt $1,150 Plant and equipment, net 2,160 Common equity 1,665 Total assets $2,880 Total liabilities and equity $2,880
%
WACC
The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 17%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firmâs total debt, which is the sum of the companyâs short-term debt and long-term debt, equals $1,205. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick's WACC using market value weights. Round your answer to two decimal places. answer in percentage and round at the end to two decimal places
| Assets | Liabilities And Equity | |||
| Cash | $ 120 | Accounts payable and accruals | $ 10 | |
| Accounts receivable | 240 | Short-term debt | 55 | |
| Inventories | 360 | Long-term debt | $1,150 | |
| Plant and equipment, net | 2,160 | Common equity | 1,665 | |
| Total assets | $2,880 | Total liabilities and equity | $2,880 | |
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Related questions
The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
| Cash and marketable securities | $3,100 | Short-term debt | $77,200 | ||
| Accounts receivable | 121,600 | Accounts payable | 63,600 | ||
| Inventory | 126,600 | Current liabilities | $140,800 | ||
| Current assets | $251,300 | ||||
| Property, plant, and equipment | 306,800 | Long-term debt | 210,200 | ||
| Deferred taxes | 46,600 | ||||
| Other assets | 87,400 | Shareholders' equity | 247,900 | ||
| Total | $645,500 | Total | $645,500 | ||
The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.
Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Cost of equity %
Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
