Food Shoppe Galore had the following information: Total market value of a company's stock: $650 million Total market value of the company's debt: $150 million What is the weighted average of the company's debt? Multiple Choice 18.75% 40.75% 55.75% 81.25% 90.50%

18.75%

Explanation:

Market value of stock = 650,000,000

Market value of debt = 150,000,000

Total market value of capital = Market value of stock + Market value of debt

Total market value of capital = 650,000,000 + 150,000,000 = 800,000,000

Calculate the proportion of debt;

= 150,000,000 / 800,000,000

= 0.1875

Convert the 0.1875 to a percentage; 0.1875 * 100 = 18.75%

Therefore, the weight average of the company's debt is 18.75%