Question 3.The following information is for Logo, Inc. a national consumer products company:Liabilities and EquityBook valuesTarget Capital StructureNotes Payable$2003%Long-term Debt1,00015%Preferred Stock5005%Common equity4.20077%Assume that you are an analyst preparing to calculate Logo’s WACC and that the company’starget capital structure values above are unknown to you. Further, assume that Logos cost ofdebt and cost of equity values are significantly different from each other. How will your estimateof WACC be affected by using weights calculated from the known book values rather than theunknown target capital structure in your calculations?

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