Book Co. has 1 million shares of common equity with a par (book) value of $1, retained
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Book Co. has 1 million shares of common equity with a par (book) value of $1, retained earnings of $30 million, and its shares have a market value of $50 per share. It also has debt with a par value of $20 million that is trading at 101% of par.
a. What is the market value of its equity?
b. What is the market value of its debt?
c. What weights should it use in computing its WACC?
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Plan The book value of its equity and debt are not relevant for computing the weigh...View the full answer
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