Barley Corp Has Debt with a Book Value of $19

question 97

Multiple Choice

Barley Corp has debt with a book value of $19 million,currently trading at 90% of book value.It also has book value of equity of $15 million,and 10 million shares of common stock trading at $2.45 per share.What weights should Barley Corp use for debt and equity in calculating its WACC?

• A)0.56,0.44
• B)0.44,0.56
• C)0.41,0.59
• D)0.5,0.5
• E)0.6,0.4

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Definitions:

Average Variable Cost

The cost per unit of output that varies with the level of production, excluding any fixed costs.

Learning-by-Doing

The process through which skill and efficiency are improved over time as a result of practice and experience.

Economies of Scale

The cost advantage that arises with increased output of a product, where the average cost per unit decreases as the scale of production expands.

Technological Advance

Progress in technology that improves efficiency and productivity, often leading to economic growth.