Company X Has 2 Million Shares of Common Stock Outstanding

question 37

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?

• A)15.38%
• B)28.6%
• C)31.0%
• D)33.3% 2 million shares x $3.00 = $6,000,000
• $2 million debt x 90% = $1,800,000
• Total value = $7,800,000

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