Company X Has 2 Million Shares of Common Stock Outstanding

question 83

Multiple Choice

Company X has 2 million shares of common stock outstanding at a book value of $2 per share.The stock trades for $3.00 per share.It also has $2 million in face value of debt that trades at 90% of par.What is its ratio of debt to value for WACC purposes?(Use the values in dollar.)

• A)23.08%
• B)28.6%
• C)31.0%
• D)33.3%

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Definitions:

Argon

A noble gas element with atomic number 18, colorless and odorless, used in lighting and welding due to its inertness.

Baking Soda

A common name for sodium bicarbonate, a chemical compound used in baking as a leavening agent.

Elemental Symbol

A one or two-letter abbreviation derived from the element's name in English or Latin, representing a chemical element on the periodic table.

Platinum

A chemical element with the symbol Pt and atomic number 78, a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal.