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QUESTION
To calculate the WACC let's go back to the Paley Products, Inc. financial statements for 2016 on p. 300 of the
To calculate the WACC let's go back to the Paley Products, Inc. financial statements for 2016 on p. 300 of the
text. Paley has a pre-tax cost of debt of 5%, a cost of equity of 9.8%, 10,000 shares outstanding at a market price of $129.08 each and a tax rate of 35%:
1. What are the weights of debt (all debt, the Bank Notes and the Mortgage) and equity for Paley?
Paley Products, Inc. Forecast Balance Sheet Actual 2016 Cash 5 20.400Accounts Receivable 388.000Inventory 826.200Current Assets 51.1 34,600Gross Book Value $326,300Accumulated Depreciation (505,800)Net Book Value 230.500Total Assets 51.461100Bank Notes 5 286,000Accounts Payable 306,000Accruals 77.500Current Liabilities $ 669.500Mortgage 36,700Common Stock 365,000Retained Earnings 393.900 Liabilities + Equity $1,465,100