The book value of Debt is $600M and the book value of Equity is $1,400M. The company's stock is currently trading at $4 per share and there are 1M shares outstanding. The tax rate is 30% What is the % of Debt in the Capital Structure?
Information Provided:
Bok value of debt = $600M
Book value of equity = $1400M
Current price of stock = $4
Outstanding shares = 1M
Tax rate = 30%
Capital Structure: The capital structure of a company comprises a combination of debt and equity capital. Such capital is raised from different sources like equity, debt, preference shares. If a company has higher equity and low debt capital structure, such a company is said to have lower leverage. Where another company might have higher debt and lower equity capital structure, such a company is said to have higher leverage.
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