Answered

Westonci.ca is the Q&A platform that connects you with experts who provide accurate and detailed answers. Get quick and reliable answers to your questions from a dedicated community of professionals on our platform. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.

The calculation of WACC involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure.
(rstd, rps, rs, rd)
_______ is the symbol that represents the required rate of return on short-term debt in the weighted average cost of capital (WACC) equation.
Co. has $2.3 million of debt, $1 million of preferred stock, and $2.2 million of common equity. What would be its weight on debt?
a. 0.42
b. 0.18
c. 0.40
d. 0.16

Sagot :

abiolataiwo2015

Answer:

a. 0.42

Explanation:

Calculation to determine What would be its weight on debt?

First step is to calculate the Total firm capital

Total firm capital= $2.3 + $1 + $2.2

Total firm capital= 5.50 million.

Now let determine the weight on debt using this formula

Weight on debt= Debt in the firm/ Total firm capital

Let plug in the formula

Weight on debt = $2.3 million/ 5.50 million

Weight on debt = 0.4182.

Weight on debt=0.42 (Approximately)

Therefore What would be its weight on debt is 0.42

Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Westonci.ca is here to provide the answers you seek. Return often for more expert solutions.