Weighted Average Cost of Capital. Valie Enterprises, Inc., has compiled the following investments: Type of Capital                  Book Value         Market Valu       e After-Tax Cost Long-term debt...

Weighted Average Cost of Capital. Valie Enterprises, Inc., has compiled the following investments:

Type of Capital                  Book Value         Market Valu       e After-Tax Cost

Long-term debt                $3,000,000           $2,800,000           4.8%

Preferred stock                                102,000                 150,000                 9.0%

Common stock                  1,108,000             2,500,000             13.0%

$4,210,000 $5,450,000

(a) Calculate the weighted average cost of capital, using (1) book value weights and (2) market value weights. (b) Explain the difference in the results obtained in (a).