(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 $440 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 $320 million and invest only $20 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

In the question ,the capital investment is $440 of which Debt is 320 and Equity is 120 Hence weights are as below Debt = 320/440 = 0.727 Equity = 120/440 = 0.273

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