Assume Bismuth Electronics Has a Book Value of $6 Billion

question 78

Multiple Choice

Assume Bismuth Electronics has a book value of $6 billion of equity and a face value of $19.7 billion of debt. The market values of equity and debt are $2.5 billion and $18.5 billion. A Wall Street financial analyst determines values of equity and debt as $3 billion and $20 billion. Which of the following values should be used for calculating the firm's WACC?

• A) $6 billion of equity and $19.7 billion of debt
• B) $2.5 billion of equity and $20 billion of debt
• C) $3 billion of equity and $19.9 billion of debt
• D) $2.5 billion of equity and $18.5 billion of debt

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Definitions:

Price Falls

A situation where the price of goods or services decreases in the market due to various factors like excess supply, reduced demand, or external economic conditions.

Consumer Considers

Factors or elements that consumers take into account when making purchasing decisions.

Value

The importance, worth, or usefulness of something, often in terms of monetary worth.

Price

The amount of money required to purchase a good or service.