Assets Liabilities And Equity

WACC The Patrick Company’s year-end balance sheet is shown
below. Its cost of common equity is 16%, its before-tax cost of debt is 13%,
and its marginal tax rate is 40%. Assume that the firm’s long-term debt sells at
par value. The firm has 576 shares of common stock outstanding that sell for
$4.00. Calculate Patrick’s WACC using market value weights.

Assets Liabilities and Equity

Cash: $ 120

Accounts receivable: 240

Inventories: 360

Long-term debt: $1,152

Plant and equipment: 2,160

Common equity: 1,728

Total assets: $2,880

Total liabilities: $2,880

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