Question

The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, 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 firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,133. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet Calculate Paulson's WACC using market value weights. Round your answer to two decimal places. Do not round your intermediate calculations. Assets Liabilities And Equity Cash $ 120 Accounts payable and accruals $ 10 Accounts receivable 240 Short-term debt 43 Inventories 360 Long-term debt $1,090 Plant and equipment, net 2,160 Common equity 1,737 Total assets $2,880 Total liabilities and equity $2,880

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Calibri Dr General -11AA = = = D- DA Wrap Text Merge & Center - BI U $ % , :.: E Copy Paste Format Painter Clipboard B1 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & Clear Filter Editing Find & Select Font Alignment Number Cells A в | 1 WACC 2 3 COST OF COMMON EQUITY 4 COST OF DEBT (BEFORE TAX) 5 TAX RATE 6 COMMONS SHARES OUTSTANDING 7 CURRENT PRICE 8 LONG TERM DEBT SELLS AT PAR VALUE 16% 10% 40% 576.00 4.00 YES 9 120 10 BALANCE SHEET 11 ASSETS 12 CASH 13 ACCOUNTS RECEIVABLE 14 INVENTORIES 15 PLANT &EQUIPMENT, NET 16 TOTAL ASSETS 240 360 2160 2880 LIABILITIES & EQUITY ACCOUNTS PAYABLE AND ACCURALS SHORT TERM DEBT LONG TERM DEBT COMMON EQUITY TOTAL LIABILITIES AND EQUITY 10 43 1090 1737 2880 17 18 19 MARKET VALUE OF DEBT I NTL CAP BUD LEASING Rea ferences 1133 clean [=E13+E14] YIELD bond portfolio cap stru WACC H PV, FV, ANNUITY DIR right RESI ex div DIV POLICY NAME DIV YIELD ETEMADI 513 Sheeti Sheet2 DOUBLE BO 130% DO 4 * 4 0 ENG 30-10-2019

ke - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut General Wrap Text Merge & Center - $ % , :.: Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Σ AutoSum : A Fill Sort & Clear Filter Editing Find & Select Number Cells (=E13+E14] (=B6*B7] [ESUM(B19:B20)] Calibri -11AA = = = Dr E Copy Paste Format Painter BI U D- DA Clipboard Font Alignment B35 - fix A в 17 18 19 MARKET VALUE OF DEBT 1133 20 MARKET VALUE OF COMMON EQUITY 2304 21 TOTAL CAPITAL 3437 22 23 PERCENTAGE OF DEBT 32.96% 24 PERCENTAGE OF COMMON EQUITY 67.04% 25 26 AFTER TAX COST OF DEBT 6.00% 27 28 WACC 12.70% 29 30 31 [=B19/B21] [=B20/B21] [=B4*(1-B5)] [=B23*(B26) + (B24)*(B3)] 32 33 34 35 H LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio cap stru WACC RESI ex div DIV POLICY NAME DIV YIELD ETEMADI 513 Sheeti I NTL CAP BUD ferences Sheet2 DOUBLE BO 130% Rea DO 4 * 4 0 ENG 30-10-2019