Market value of Bonds = 56.0 x 1.02, or 57.12 mil
Total Capital = 181.92 mil
Debt = 57.12 / 181.92, or .314
Equity = 124.8 / 181.92, or .686
14. Suppose a firm has 10.4 million shares of common stock outstanding with a par value of $1.00 per share. The current market price per share is $12.00. The firm has outstanding debt with a par value of $56.0 million selling at 102% of par. What capital structure weight would you use for debt when calculating the firm's WACC?
A) 0.157
B) 0.314
C) 0.686
D) 0.739
E) 0.843
I need some help in solving this problem. I am more concerned with the process of solving it than the answer itself. I'm just not sure where to start... Thanks in advance!
