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Part 1
MV Corporation has debt with market value of ​$96 ​million, common equity with a book value of ​$96 ​million, and preferred stock worth ​$17 million outstanding. Its common equity trades at ​$47 per​ share, and the firm has 6 million shares outstanding. What weights should MV Corporation use in its​ WACC?
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Part 1
The weight of debt for the WACC calculation is 
  
enter your response here​%.  ​(Round to two decimal​ places.)

To calculate the weight of debt for MV Corporation's Weighted Average Cost of Capital (WACC), you need to use the following formula for the weight of debt (W_d):

\[
W_d = \frac{\text{Market Value of Debt}}{\text{Total Market Value of the Firm}}
\]

Where:
- **Market Value of Debt** = $96 million
- **Market Value of Equity** = $ \text{Common equity price} \times \text{Shares outstanding} = 47 \, \text{USD/share} \times 6 \, \text{million shares} = 282 \, \text{million USD} $
- **Market Value of Preferred Stock** = $17 million

The total market value of the firm is:

\[
\text{Total Market Value} = \text{Market Value of Debt} + \text{Market Value of Equity} + \text{Market Value of Preferred Stock}
\]

Now, let's calculate the weight of debt:

\[
W_d = \frac{96}{96 + 282 + 17}
\]

I’ll compute this now.The weight of debt for MV Corporation's WACC calculation is **24.30%**.

Would you like further details or explanations? 

Here are 5 related questions to expand on this topic:
1. How do you calculate the weights of equity and preferred stock in the WACC formula?
2. Why is the market value of equity used in WACC instead of the book value?
3. How does preferred stock differ from common equity in the WACC calculation?
4. What is the significance of rounding in WACC calculations for corporate finance decisions?
5. How does the inclusion of debt in the WACC affect a firm's cost of capital?

**Tip**: When calculating WACC, always use market values, not book values, for the most accurate reflection of current financing.

MV Corporation has debt with market value of ​$96 ​million, common equity with a book value of ​$96 ​million, and preferred stock worth ​$17 million outstanding. Its common equity trades at ​$47 per​ share, and the firm has 6 million shares outstanding. What weights should MV Corporation use in its​ WACC? The weight of debt for the WACC calculation is ​__%. ​(Round to two decimal​ places.)

Learn how to calculate MV Corporation's Weighted Average Cost of Capital (WACC) with market values of debt, equity, and preferred stock. The problem involves determining the weight of debt using corporate finance formulas, and is suitable for college-level finance students.

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