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Book Co. has 1.4 million shares of common equity with a par? (book) value of $...

Book Co. has 1.4 million shares of common equity with a par? (book) value of $ 1.35?, retained earnings of $ 29.9 ?million, and its shares have a market value of $ 50.41 per share. It also has debt with a par value of $ 18.3 million that is trading at 104 % of par.

a. What is the market value of its? equity?

The market value of the equity is ?$ million. ?(Round to two decimal? places.)

b. What is the market value of its? debt?

The market value of the debt is $ million. ?(Round to two decimal? places.)

c. What weights should it use in computing its? WACC?

The debt weight for the WACC calculation is ?%. ?(Round to two decimal? places.)

The equity weight for the WACC calculation is %. ?(Round to two decimal? places.)

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Answer #1

a) Market value of equity = Number of shares*market price+retained earnings

Market value of equity = 1400000*50.41+29900000

Market value of equity = 70574000+29900000

Market value of equity = 100474000

b) Market value of debt= Par value*trading percentage

Market value of debt= 18300000*104/100

Market value of debt = 19032000

c)Total capital = 15.Market value of equity+Market value of debt

Total capital = 119506000

WACC debt % = Market value of debt/Total capital *100
WACC debt % = 19032000/119506000*100
WACC debt % = 15.93%
WACC equity% = Market value of equity/Total capital * 100
WACC equity% = 100474000/119506000 * 100
WACC equity% = 84.07%
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