Acme Manufacturing reports the following capital structure with amounts reported in $ millions:

 long-term debt of $340; 

present value of leases of $490; 

convertible debt of $190; and 

common equity of $400. 

Further research indicates that the market value of the long-term debt is 115% of its book value, the market value of the convertible debt is 110% of its book value and (80% of the convertible debt is debt-related with the remainder equity-related, and the market value of the common equity is 430% of its book value. 

What should be the percentage (relative weight) of debt that to be included in the WACC calculation? 

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC we need to determine the weights of each comp... View the full answer