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The following information is for ZYX, Inc. a national consumer products company: Liabilities and Equity Notes Payable Long-term Debt Preferred Stock Common equity Book
The following information is for ZYX, Inc. a national consumer products company: Liabilities and Equity Notes Payable Long-term Debt Preferred Stock Common equity Book values Target Capital Structure $12,000 10% 150,000 32% 5,000 184,000 20% 38% Assume that you are an analyst preparing to calculate ZYX's WACC and that the company's target capital structure values above are unknown to you; all you know from the outside is the book values provided. Further, assume that ZYX's cost of debt and cost of equity values are significantly different from each other. Assume for purposes of this question that their cost of debt is higher than their cost of equity. Your estimate of WACC will be inaccurate because you will use weights based on the current values above. How will this inaccuracy affect your estimate of intrinsic value for this company?
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