(defining capital structure weights) Bob is considering buying a chains of cemet

Question

(defining capital structure weights) Bob is considering buying a chains of cemeteries for $380 million. Since the primary assets of the biz is real estate,bob's management has determined that they will be able to borrow the majority of the money needed to buy the business.The current owners have no debt financing but bob plans to borrow $290 million and invest only 90 million in equity in the acquisition. What weights should bob use in computing the WACC for this acquisition? The appropriate w/cs weight is ___% (round to one decimal place)

Explanation / Answer

Total Investment = $380 million of which Debt finance = $290million , equity finance = $90millions The appropriate w/cs weight is Debt = 290 / 380 = 0.763 Equity = 90/380 = 0.237

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