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To Calculate The Wacc Let’S Go Back To The Paley Products Inc Financial Statements For 2016 On P 300 Of The

Question

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 20.400
Accounts Receivable 388.000
Inventory 826.200
Current Assets 51.1 34,600
Gross Book Value $326,300
Accumulated Depreciation (505,800)
Net Book Value 230.500
Total Assets 51.461100
Bank Notes 5 286,000
Accounts Payable 306,000
Accruals 77.500
Current Liabilities $ 669.500
Mortgage 36,700
Common Stock 365,000
Retained Earnings 393.900 Liabilities + Equity $1,465,100 Finance