Templeton Inc. is considering the acquisition of a chain of cemeteries for $360

Question

Templeton Inc. is considering the acquisition of a chain of cemeteries for $360 million. Since the primary asset of this business is real estate Templeton's management has determined they will be able to borrow the majority of the money needed to purchase the business. The current owners have no debt financing but Templeton plans to borrow $260 million and invest only $100 million in equity in the acquisition. What weighs should Templeton use in computing the WACC for this acquisition? The appropriate Wd weigh is? Round to one decimal place.

Explanation / Answer

Weight of debt =(260/360) = 72.2% Weight of Equity= (100/360)= 27.8%

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