[Solved] An Analyst Has Obtained the Following Information About Maudite Brewers

Question 15
Multiple Choice

An analyst has obtained the following information about Maudite Brewers Co.: Book value of assets $25,000 Book value of common equity $10,000, with 4,000 shares outstanding, currently trading at $5 per share Book value of preferred shares $5,000, with 3,000 preferred shares outstanding which are currently trading at $2 per share. The yield on the debt equals the coupon rate. The weights used to determine the weighted average cost of capital are: Common Equity: Preferred Equity: Debt:

A)55.56% 16.67% 27.77%
B)40% 20% 40%
C)80% 10% 10%
D)Cannot be determined because we need the market value of debt.

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