Question

Question 7 (1 point) A firm has a market capitalization (market value of equity) of $14 Billion and net debt of $4 Billion. Calculate the weight of equity in the firm's weighted average cost of capital (WACC) calculation. [Note: Enter your answer as a percentage rounded to two decimal places.] Your Answer: Answer units

Answer 1

Total Capital value = Value of Debt + Value of Equity

=4+14

=18

Weight of Debt = Value of Debt/Total Capital Value

= 4/18

=0.2222

Weight of Equity = Value of Equity/Total Capital Value

= 14/18

=0.7778 = 77.78%

Answer 2

ANSWER :

C = E + D = 14 + 4 = 18 billion dollars.

Weight of equity in the capital = E/C = 14 / 18 = 0.7778 = 77.78  % (ANSWER).