单选题
Leavenworth Industries has the following capital structure on December 31, 2008
|
|
Book Value |
Market Value |
|
Debt outstanding: |
$8 million |
$10.5 million |
|
Preferred stock outstanding: |
$2 million |
$1.5 million |
|
Common stock outstanding: |
$10 million |
$13.7 million |
|
Total capital: |
$20 million |
$25.7 million |
What is the firm's target debt and preferred stock portion of the capital structure based on existing capital structure? Debt Preferred Stock ①A. 0.41 0.10
②B. 0.40 0.06
③C. 0.41 0.06
A．① B．② C．③
【正确答案】
C
【答案解析】The weights in the calculation of WACC should be based on the firm's target capital structure, that is, the proportions (based on market values) of debt, preferred stock, and equity that the firm expects to achieve over time. Book values should not be used. As such, the weight of debt is 41% ($10.5/$25.7), the weight of preferred stock is 6% ($1.5/$25.7) and the weight of common stock is 53% ($13.7/$25.7).