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Category > Accounting Posted 18 May 2017 My Price 5.00

Book Co. has 1 million shares of common equity with a par (book)

Book Co. has 1 million shares of common equity with a par (book) value of $1, retained earnings of $30 million, and its shares have a market value of $50 per share. It also has debt with a par value of $20 million that is trading at 101% of par.

a. What is the market value of its equity?

b. What is the market value of its debt?

c. What weights should it use in computing its WACC?

Answers

Alpha Geek
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Status NEW Posted 18 May 2017 08:05 AM My Price 5.00

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file 1495097221-Answer.docx preview (118 words )
B-----------ook----------- Co-----------. h-----------as -----------1 m-----------ill-----------ion----------- sh-----------are-----------s o-----------f c-----------omm-----------on -----------equ-----------ity----------- wi-----------th -----------a p-----------ar -----------(bo-----------ok)----------- va-----------lue----------- of----------- $1-----------, r-----------eta-----------ine-----------d e-----------arn-----------ing-----------s o-----------f $-----------30 -----------mil-----------lio-----------n, -----------and----------- it-----------s s-----------har-----------es -----------hav-----------e a----------- ma-----------rke-----------t v-----------alu-----------e o-----------f $-----------50 -----------per----------- sh-----------are-----------. I-----------t a-----------lso----------- ha-----------s d-----------ebt----------- wi-----------th -----------a p-----------ar -----------val-----------ue -----------of -----------$20----------- mi-----------lli-----------on -----------tha-----------t i-----------s t-----------rad-----------ing----------- at----------- 10-----------1% -----------of -----------par-----------. -----------a. -----------Wha-----------t i-----------s t-----------he -----------mar-----------ket----------- va-----------lue----------- of----------- it-----------s e-----------qui-----------ty?----------- b-----------. W-----------hat----------- is----------- th-----------e m-----------ark-----------et -----------val-----------ue -----------of -----------its----------- de-----------bt?----------- c-----------. W-----------hat----------- we-----------igh-----------ts -----------sho-----------uld----------- it----------- us-----------e i-----------n c-----------omp-----------uti-----------ng -----------its----------- WA-----------CC?----------- A-----------nsw-----------er -----------A ----------- Ma-----------rke-----------t V-----------alu-----------e o-----------f E-----------qui-----------ty -----------= 1----------- mi-----------lli-----------on
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