The Downtowner has 181,267 shares of common stock outstanding valued at $53 a share along with 12,894 bonds selling for $993 each. What weight should be given to the debt when the company computes its weighted average cost of capital?

Respuesta :

The weight of debt is 0.5713

Explanation:

                      Market value           weights

Equity              [tex]181267 * 53[/tex]            

                            $9607151            0.4287

Debt                 [tex]12894 * 993[/tex]

                          $12803742              0.5713

Total                   $22410893

Hence the weight of debt is 0.5713

The obligation market, or security showcase, is the field where interest in credits are purchased and sold. There is no single physical trade for bonds. Exchanges are for the most part made between intermediaries or huge establishments, or by singular speculators.  

The value showcase, or the securities exchange, is the field where stocks are purchased and sold. The term incorporates the entirety of the commercial centers, for example, the New York Stock Exchange (NYSE), the Nasdaq, and the London Stock Exchange (LSE), and numerous others.