MV Corporation has debt with market value of $ 103 ?million, common equity with

Question

MV Corporation has debt with market value of $ 103 ?million, common equity with a book value of $ 105 ?million, and preferred stock worth $ 18 million outstanding. Its common equity trades at $ 46 per? share, and the firm has 5.5 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.)

The preferred stock weight for the WACC calculation is %. (Round to two decimal? places.)

The common equity weight for the WACC calculation is %.?(Round to two decimal? places.)

Explanation / Answer

WACC is based on market value of capital constituents.

Market value of equity = $46 per share * 5.5 mil shares = $253 mil

Market Value of debt = $103 mil

Market Value of preferred Equity = $18 mil

Total Capital Market value = $253 mil + $103 mil + $18 mil = $374 mil

Weight of debt = Market Value of debt/Total Capital Market value = $103 mil/$374 mil = 27.54%

Weight of common equity = Market Value of common equity/Total Capital Market value = $253 mil/$374 mil =  67.65%

Weight of preferred stock = Market Value of preferred stock/Total Capital Market value = $18 mil/$374 mil =  4.81%

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