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lyudmila [28]
3 years ago
13

MV Corporation has debt with market value of $ 102 ​million, common equity with a book value of $ 99 ​million, and preferred sto

ck worth $ 19 million outstanding. Its common equity trades at $ 49 per​ share, and the firm has 5.8 million shares outstanding. What weights should MV Corporation use in its​ WACC?
Business
1 answer:
just olya [345]3 years ago
4 0

Answer:

The weights to be assigned to each component in WACC calculation is are,

Debt = 25.17%

Preferred stock = 4.69%

Common Stock = 70.14%

Explanation:

The WACC or weighted average cost of capital is the cost to a firm of its capital structure which can contain the following components- debt, preferred stock and equity. To calculate the WACC, we use the market values of debt and equity in our calculation to assign weights to each component of the capital structure.

Market value of common shares = 49 * 5.8 million  =  $284.2 million

The total value of capital structure is = 284.2 + 102 + 19 = $405.2 million

<u>The weights to be used in WACC calculation is:</u>

Debt = 102 / 405.2  =  0.2517 or 25.17%

Preferred stock = 19 / 405.2  =  0.0469 or 4.69%

Common Stock = 284.2 / 405.2  =  0.7014 or 70.14%

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cut back the expansion of labor as a trade off between higher salaries but fewer workers.

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6 0
3 years ago
What is the permeter of a rectangle
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6 0
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Which of the following business opportunities allows a business to purchase and sell a company's products, but not the right to
Degger [83]

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Dealers/distributors allows a business to purchase and sell a company's products, but not the right to use that company's trade name as its own

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4 0
3 years ago
In Mordica Company, total materials costs are $35,500, and total conversion costs are $54,000. Equivalent units of production ar
MrMuchimi

Explanation:

The computation is shown below:

Material Cost per unit = Total Material Cost  ÷  Equivalent units of production

                                    =  $35,500 ÷ 10,000  units

                                    = $3.55

Conversion Cost per unit = Total conversion cost ÷  Equivalent units of production

                                          =  $54,000 ÷ 12,000  units

                                          = $4.5

Total Manufacturing cost per unit = Material cost per unit + conversion cost per unit

                                                        = 3.55 + 4.5

                                                        = $8.05

6 0
3 years ago
Alabaster Incorporated wants to be levered at a debt to value ratio of .6 . The cost of debt is 9%. the tax rate is 35% and the
Aleks [24]

Answer:

14.925%

Explanation:

Cost of equity = Unlevered Cost of Equity + (Unlevered Cost of Equity - Cost of debt)*Debt to value ratio / (1-debt to value ratio)*(1-Tax rate)

Cost of equity = 12% + (12%-9%)*0.6/(1 - 0.6)*(1 - 35%)

Cost of equity = 0.12 + 0.018/0.4*0.65

Cost of equity = 0.12 + 0.02925

Cost of equity = 0.14925

Cost of equity = 14.925%

So, Alabaster's cost of equity will be 14.925%.

4 0
3 years ago
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