Question

The total asset market value of General Motors (GM) is $10 billion. GM has an equity market value (market capitalization) of $7 billion of equity. What are the weights in equity and debt that are used for calculating the WACC, respectively

Answer 1

0.70,0.30

Step-by-step explanation:

Calculation for the weights in equity and debt that are used for calculating the WACC respectively

Calculation for weights in equity

Weights in equity= $7 million / $10 million

Weights in equity = 0.70

Therefore the Weights in equity will be 0.70

Calculation for debt

Debt = ($10 million - $7 million) / $10 million

Debt=$3millon/$10 million

Debt= 0.30

Therefore the debt that are used for calculating the WACC will be 0.30