A firm has a market capitalization (market value of equity) of $11 Billion and net debt of $3 Billion
A firm has a market capitalization (market value of equity) of $11 Billion and net debt of $3 Billion. Calculate the weight of equity in the firm's weighted average cost of capital (WACC) calculation.
Homework Answers
total value of firm = value of equity + value of debt
= 11 + 3
= 14 billion
weight of equity = value of equity/total value of firm
= 11/14
= 78.57%
ANSWER :
C = E + D = 11 + 3 = 14 billion dollars.
Weight of equity in the capital = E/C = 11 / 14 = 0.7857 = 78.57% (ANSWER).
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