MV Corporation has debt with market value of $104 million, common equity with a book value of $96 million, and preferred stock worth $18 million

MV Corporation has debt with market value of $104 million, common equity with a book value of $96 million, and preferred stock worth $18 million outstanding. Its common equity trades at $50 per share, and the firm has 6.3 million shares outstanding. What weights should MV Corporation use in its WACC?

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

Solutions

Expert Solution

Calculation of the debt weight for the WACC calculation:

Formula:

Weight of Debt = Market value of Debt / (Market value of equity + Market value of preferred stock + Market value of debt) *100

Market value of equity = 50*6.3 315.00

Market value of debt = 104.00

Market value of preferred stock = 18.00

437.00

Weight of debt = 104 / (315+104+18)*100

= 23.80% (Answer)

The debt weight for the WACC is 23.80%.

Nabeel answered 1 year ago

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