Respuesta :
The proportion allocated to debt is 40% and to equity is 60% while computing the weighted average cost of capital (WACC).
What is equity stock?
The equity stock is the amount held by a company in the form of equity shares and must be reported on the company's balance sheet.
Given values:
Number of shares outstanding (in millions): 100
Number of outstanding bonds (in millions): 1
Market value (MV) per share: $12
Market value (MV) per bond: $800
Step-1 Computation of total market value:
[tex]\rm\ Total \rm\ market \rm\ value= \rm\ Market \rm\ value \rm\ of \rm\ debt+ \rm\ Market \rm\ value \rm\ of \rm\ equity\\\rm\ Total \rm\ market \rm\ value= (100 \times\ \$12) + (1 \times\ \$800)\\\rm\ Total \rm\ market \rm\ value=\$1,200+\$800\\\rm\ Total \rm\ market \rm\ value=\$2,000[/tex]
Step-2 Computation of proportion of debt:
[tex]\rm\ Debt \rm\ proportion=\frac{\rm\ Market \rm\ value \rm\ of \rm\ bond}{\tm\ Total \rm\market \rm\ value} \\\rm\ Debt \rm\ proportion=\frac{\$800}{\$2,000} \\\rm\ Debt \rm\ proportion=40\%[/tex]
Step-2 Computation of proportion of equity:
[tex]\rm\ Equity \rm\ proportion=\frac{\rm\ Market \rm\ value \rm\ of \rm\ equity}{\tm\ Total \rm\ market \rm\ value} \\\rm\ Equity \rm\ proportion=\frac{\$1,200}{\$2,000} \\\rm\ Equity \rm\ proportion=60\%[/tex]
Therefore, while computing WACC, the debt proportion is 40% and the equity proportion is 60%.
Learn more about the WACC in the related link:
https://brainly.com/question/14223809
#SPJ1
