In: Finance
MV Corporation has debt with market value of $98 million, common equity with a book value of $105 million, and preferred stock worth $21 million outstanding. Its common equity trades at $55 per share, and the firm has 6.5 million shares outstanding. What weights should MV Corporation use in its WACC?
The debt weight for the WACC calculation is nothing _____%. (Round to two decimal places.)
Market value of debt= $98 million
Market value of equity= $55*6,500,000= $357,500,000
Market value of preference shares= $21 million
Total firm capital= $98 million + $357.50 million + $21 million
= $476.50 million.
Weight of debt in the capital structure= $98 million/ 476.50 million
= 0.2057*100
= 20.57%
Weight of equity in the capital structure= $357.50 million/ $476.50 million
= 0.7503
= 75.03%
Weight of preference shares in the capital structure= $21 million/ $476.50 million
= 0.0441*100
= 4.41%
In case of any query, kindly comment on the solution.