A company has a market value of $8 billion of equity and a market value of $12 billion of debt. What are the weights in equity and debt that are used for calculating the WACC?

Question

Quizplus · Accepted Answer

The weight of equity is calculated as the market value of equity divided by the total market value (equity + debt), which is $8 billion / ($8 billion + $12 billion) = 0.4. The weight of debt is $12 billion / ($8 billion + $12 billion) = 0.6.

A Company Has a Market Value of $8 Billion of Equity