Book Co. has 1.5 million shares of common equity with a par (book) value of $1.30, retained earnings of $31.4 million, and its shares have a market value of $49.14 per share. It also has debt with a par value of $19.3 million that is trading at 105% 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?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Book Co. has

1.5

million shares of common equity with a par​ (book) value of

$1.30​,

retained earnings of

$31.4

​million, and its shares have a market value of

$49.14

per share. It also has debt with a par value of

$19.3

million that is trading at

105%

of par.

Book Co. has 1.5 million shares of common equity with a par (book) value of $1.30, retained earnings of $31.4 million, and its shares have a market value of $49.14 per share. It also has debt with a par value of $19.3 million that is trading at
105% 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?
Transcribed Image Text:Book Co. has 1.5 million shares of common equity with a par (book) value of $1.30, retained earnings of $31.4 million, and its shares have a market value of $49.14 per share. It also has debt with a par value of $19.3 million that is trading at 105% 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?
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