An Analyst Has Obtained the Following Information About Maudite Brewers

question 25

Multiple Choice

An analyst has obtained the following information about Maudite Brewers Co.: Book value of assets $25,000; book value of common equity $10,000; book value of preferred shares $5,000.The company has 4,000 common shares outstanding which are currently trading at $5 per share.The company has 3,000 preferred shares outstanding which are currently trading at $2 per share.The yield on the debt equals the coupon rate.The weights used to determine the weighted average cost of capital are:
Common Equity: Preferred Equity: Debt:

• A) 55.56% 16.67% 27.77%
• B) 40% 20% 40%
• C) 80% 10% 10%
• D) Cannot be determined because we need the market value of debt.

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