A firm has a market capitalization (market value of equity) of $25 Billion and net debt of $15 Billion. Calculate the weight of debt in the firm's weighted average cost of capital (WACC) calculation. [Note: Enter your answer as a percentage rounded to two decimal places.]
Total firm value= $25 + $15= $40
Weight of debt in weighted average cost of capital:
= $15/ $40
= 0.3750*100
= 37.50%.
In case of any query, kindly comment on the solution.
ANSWER :
C = E + D = 25 + 15 = 40 billion dollars.
Weight of debt in the capital = D/C = 15 / 40 = 0.375 = 37.50% (ANSWER).
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