Weighted average cost of capital using market value weights

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Reference no: EM131888785

Promo Pak has compiled the following financial data:

Source of Capital Book Value Market Value Cost

Long-term debt $ 8,000,000 $ 8,500,000 5.0%

Preferred stock 500,000 750,000 12.0

Common stock equity 9,000,000 15,000,000 16.0

------------ ------------

$17,500,000 $24,250,000

a. Calculate the weighted average cost of capital using book value weights.

b. Calculate the weighted average cost of capital using market value weights.

Reference no: EM131888785

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