Question

what is the correct answer for 20?

A. 8.53% B. 9.28% C. 13.07% D. 12.00% 12.32% 23 a 7 0 Antonio's stock is selling for $40, and there are 250,000 shares outstanding. The Face value of the bonds is $9,000,000 and the bonds are selling at a 95% par value. What are the capital structure weights Antonio would use to calculate the WACC? FORMAT TO FOUR DECIMAL PLACES Marlet ralce oe dst A. 0.4490 equity; 0.5510 debt 0.4124 equity; 0.5876 debt MSr. 06467 equity 0.5589 debt aooooy ) SSC С 0.6467 equity; 0.3533 debt 0.5391 equity; 0.4609 debt E. Assume you have purchased a 20 year bond with a maturity value of $5,000. The bond 21. pays zero interest for the first four years, pays $500 a year for the next four yean and then S2 500 a

Answer 1

Option (E) is correct

In calculating the weights or proportion of debt and equity in WACC we take market values of debt and equity.

Market value of equity = $40 * 250000 = $10000000

Market value of debt = $9000000 * 95% / 100 % = $8550000

Total market value of equity & debt = $10000000 + $8550000 = $18550000

Equity proportion = $10000000 / $18550000 = 0.5391

Debt proportion = $8550000 / $18550000 = 0.4609