# Answer to Question #50969 in Finance for Os

Question #50969
Book Co. has 1.1 million shares of common equity with par (book) value of \$1.35 and retained earnings of \$28.5 million, and its shares have a market value of \$50.29 per share. It also has debt with a par value of \$18.4 million that is trading at 101% of par. a. What is the market value of its equity? b. What is the market value of its debt? c. What weights should it use in a computing its WACC?
1
2015-02-26T09:29:33-0500
a. What is the market value of its equity?
Equity = 1.1 million shares * \$50.29 + \$28.5 million = \$83.819 million

b. What is the market value of its debt?
Debt = \$18.4 million * 101% /100% = \$18.584 million

c. What weights should it use in a computing its WACC?

For equity: Equity / (Equity + Debt) = \$83.819 million / (\$83.819million + =\$18.584 million) = 0.8185
For debt: Debt / (Equity + Debt) =\$18.584 million =0.1815

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