GM Has a Market Value of $8 Billion of Equity

question 8

Multiple Choice

GM has a market value of $8 billion of equity and a market value of $12 billion of debt.What are the weights in equity and debt that are used for calculating the WACC?

• A)0.5,0.5
• B)0.6,0.4
• C)0.4,0.6
• D)0.8,0.2

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Definitions:

Loss On Bond Retirement

Loss on bond retirement occurs when the redemption price of a bond is higher than its carrying value on the issuer’s books, leading to a financial loss.

Premium On Bonds Payable

The amount by which the bond's selling price exceeds its face value, representing additional cost to the issuer.

Loss On Bond Retirement

A financial loss that occurs when a bond is redeemed before its maturity date and the redemption value exceeds its carrying value.

Interest Payable

A liability account showing the amount of interest expense that has been incurred but not yet paid as of the balance sheet date.