Which of the following is the best estimate for the weight of debt for use in calculating the firm's WACC?

Question

Quizplus · Accepted Answer

The weight of debt is the proportion of the firm's total capital that is financed by debt. It is calculated by dividing the firm's total debt by the firm's total capital. In this case, the firm's total debt is $100 million and the firm's total capital is $500 million. Therefore, the weight of debt is 100 / 500 = 0.20 or 20%. The closest answer choice to 20% is A) 18.67%.

Which of the Following Is the Best Estimate for the Weight