Question
A firm has 12,000 shares of stock outstanding that sell for $34 each. The book value of equity is $400,000. The firm has also issued
A firm has 12,000 shares of stock outstanding that sell for $34 each. The book value of equity is $400,000. The firm has also issued a 5-year bond with a $250,000 par value and a 4% coupon rate. The yield to maturity of the bond is 4.5%. What value should be used as the weight of equity when computing WACC? (The bond pays coupon annually.)
| A. | 67% | |
| B. | 50% | |
| C. | 44% | |
| D. | 63% | |
| E. | 56% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Foundations Of Business Analysis
Authors: M Douglas Berg
1st Edition
1465222030, 9781465222039
