P14-2 (similar to) Question Help (Defining capital structure weights) In August
ID: 1175566 • Letter: P
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P14-2 (similar to) Question Help (Defining capital structure weights) In August 2015 the capital structure of the Emerson Electric Corporation (EMR) (measured in book and market values) was as follows (S Millions) Short-term debt Long-term debt Common equity Total capital Market Value 2,640 4,248 35,640 $42,528 Book Value 2,640 4,248 8,141 $15,029 What weights should Emerson use when computing the firm's weighted average cost of capital? The appropriate weight of debt, wd, is | %. (Round to one decimal place.)Explanation / Answer
Appropriate weigts to use in Market value
Total value to use for calculating WACC = 42,528 - 2,640 = 39,888
Weight of debt =(2,640 + 4,248) / 42,528= 0.162
Weight of equity = 35,640 / 42,528 = 0.838
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