Given the following data for Golf Corporation: market price/share = $13; Book va
ID: 2758620 • Letter: G
Question
Given the following data for Golf Corporation: market price/share = $13; Book value/share = $10; Number of shares outstanding = 100 million; market price/bond = $900; Face value/bond = $1,000; Number of bonds outstanding = 1 million; Calculate the proportions of debt (D/V) and equity (E/V) for the firm that you would use for estimating the weighted average cost of capital (WACC): Please show the work. Thanks
A. 40% debt and 60% equity
B. 50.8% debt and 49.2% equity
C. 40.9% debt and 59.1% equity
D. none of the given values
Explanation / Answer
Answer C
MP per share
Book value per share
No of share(million)
MP
Book value
MP
BV
Equity
13
10
100
1300
1000
59.09%
50.00%
Bond
900
1000
1
900
1000
40.91%
50.00%
2200
2000
MP per share
Book value per share
No of share(million)
MP
Book value
MP
BV
Equity
13
10
100
1300
1000
59.09%
50.00%
Bond
900
1000
1
900
1000
40.91%
50.00%
2200
2000
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