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MV Corporation has debt with market value of $100 million, common equity with a book value of $100 million, and preferred stock worth $20 million outstanding. Its common equity trades at $50 per share, and the firm has 6 million shares outstanding. What weights should MV Corporation use in its WACC

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Tundexi

Answer:

Market value of Common Stock

Number of stock                             6 million

Market price per share                   $50

Market value of Common Stock  $300 million

Weights for various sources

Source       Market         % of Total Value

Debt            100               23.81%  [100/420*100]

Preferred    20                 4.76%   [20/420*100]

Common     300              71.43%  [300/420*100]

Total            420               100%

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