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The following market information was gathered for the ACME corporation. The common stock is selling ...
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The following market information was gathered for the ACME corporation. The common stock is selling ...
The following market information was gathered for the ACME corporation. The common stock is selling for $40.00 per share and there are 100,000 shares outstanding. Retained earnings equal $400,000, preferred stock has 1,000 shares outstanding selling at $120.00 per share, and 500 outstanding long-term bonds are selling for $1,035.00 each. For purposes of estimating the firm's WACC, what are the market value weights of long-term debt, preferred stock, and equity?
A) D/V = 10.27%, PS/V = 2.38%, and E/V = 87.34%
B) D/V = 10.78%, PS/V = 3.08%, and E/V = 86.14%
C) D/V = 11.16%, PS/V = 2.59%, and E/V = 86.25%
D) D/V = 33.33%, PS/V = 33.33%, and E/V = 33.33%
Textbook
Financial Management: Core Concepts
Edition:
2
nd
Author:
Brooks
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C -- E = $40 × 100,000 shares = $4,000,000, P = $120 × 1,000 shares = $120,000, D = $1,035 × 500 bonds = $517,500. E/V = $4,000,000/$4,637,500 = 86.25%, P/V = $120,000/$4,637,500 = 2.59%, D/V = $517,500/$4,637,500 = 11.16%
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