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

Name: A company has a book value of $8 billion of equity and a face value of $12 billion of debt. What are the weights in debt and equity that are used for calculating the WACC?
Brand: Quizplus
Rating: 4.9 (34 reviews)

Question

Quizplus · Accepted Answer

The weights for calculating WACC should be based on market values, not book values or face values. Without market values, the weights cannot be determined.

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