To calculate the WACC let’s go back to the Paley Products, Inc. financial statements for 2016 on p. 300 of the

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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

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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 6,300Accumulated 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

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