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Dmitrij [34]
2 years ago
12

Little LampLighter Inc has a book value of $10 million in debt; its bonds are trading at $900 and there are 11,000 outstanding.

It also has a market value of equity of $25 million. Shareholders require a 14% return on their shares and creditors require an 8% before-tax return on their investment. The weighted average return required by investors in Spock Enterprises is Blank______%.
Business
1 answer:
kumpel [21]2 years ago
7 0

Based on the amount of debt and equity that Little LampLighter has, the weighted average rate of return would be 12.3%.

<h3>What is the weighted average rate of return?</h3>

First find the total value of debt and equity:
= 10 + 25

= $35 million

The weighted average return is:

= (10 / 35 x 8%) + (25 / 35 x 14%)

= 2.286% + 10%

= 12.3%

Find out more on weighted average rate of return at brainly.com/question/17284158.

#SPJ12

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