Question

Book Co. has 1.2 million shares of common equity with a par (book) value of $ 1.05, retained earnings of $ 28.3 million, and its shares have a market value of $ 48.83 per share. It also has debt with a par value of $ 18.7 million that is trading at 101 % of par. a. What is the market value of its equity? b. What is the market value of its debt? c. What weights should it use in computing its WACC? a. What is the market value of its equity? The market value of the equity is $ nothing million.

Answer #1

Capital Structure weights on a
market value basis |
||||

Particulars |
Number |
Book
Value |
Market
Value |
Weights |

Debt | 18,700.00 | 1,010.00 | 18,887,000.00 | 24.38% |

Common Equity | 1,200,000.00 | 48.83 | 58,596,000.00 | 75.62% |

77,483,000.00 |
100.00% |
|||

market value of its equity | 58,596,000.00 | |||

market value of its debt | 18,887,000.00 | |||

Weight of Debt | 24.38% | |||

Weight of Equity | 75.62% | |||

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Multiple Choice
5.31%
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7%
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