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

To calculate the weights, we need to divide the market value of equity and debt by their sum:
Equity weight = $8 billion / ($8 billion + $12 billion) = 0.4 or 40%
Debt weight = $12 billion / ($8 billion + $12 billion) = 0.6 or 60%
Therefore, the correct choice is B, with equity weight of 0.4 and debt weight of 0.6.

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