Question

otal Assets $23,610 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity: Book Value $ 6,150 Market Value $25,830 Marginal Income Tax Rate 37% Market Beta 1.73 Determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital. Select one: A. 26.2% B. 30.0% C. 61.3% D. 50.0%

Answer 1

None of the options available are correct

Weight on equity capital is 70%

Explanation:

Consider the following data below

Market value of equity=25,830

Market value of debt=11,070

Weight on equity capital = E / ( D + E ) = 25,830 / ( 25830 + 11070 ) = 0.7=70%