What percentage of value should be allocated to equity in WACC computations for a firm with $50 million in debt selling at 85% of par, $50 million in book value of equity, and $65 million in market value of equity?

Name: What percentage of value should be allocated to equity in WACC computations for a firm with $50 million in debt selling at 85% of par, $50 million in book value of equity, and $65 million in market value of equity?
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Question

Quizplus · Accepted Answer

W_e = $65m/[($50m × 0.85) + $65m] = 0.6047, or 60.47%

What Percentage of Value Should Be Allocated to Equity in WACC