Book Co. has 1.4 million shares of common equity with a par? (book) value of $ 1
ID: 2618010 • Letter: B
Question
Book Co. has 1.4 million shares of common equity with a par? (book) value of $ 1.35?, retained earnings of $ 29.9 ?million, and its shares have a market value of $ 50.41 per share. It also has debt with a par value of $ 18.3 million that is trading at 104 % of par.
a. What is the market value of its? equity?
The market value of the equity is ?$ million. ?(Round to two decimal? places.)
b. What is the market value of its? debt?
The market value of the debt is $ million. ?(Round to two decimal? places.)
c. What weights should it use in computing its? WACC?
The debt weight for the WACC calculation is ?%. ?(Round to two decimal? places.)
The equity weight for the WACC calculation is %. ?(Round to two decimal? places.)
Explanation / Answer
a) Market value of equity = Number of shares*market price+retained earnings
Market value of equity = 1400000*50.41+29900000
Market value of equity = 70574000+29900000
Market value of equity = 100474000
b) Market value of debt= Par value*trading percentage
Market value of debt= 18300000*104/100
Market value of debt = 19032000
c)Total capital = 15.Market value of equity+Market value of debt
Total capital = 119506000