Question

Mitchell Co. has $2.3 million of debt, $3 million of preferred stock, and $3.3 million of common equity. What would be its weight on debt? Answer choices are

O 0.27,
O 0.28,
O 0.32,
O 0.38

Answer 1

The weight of debt for Mitchell Co. is 0.27.

Step-by-step explanation:

To find the weight of debt for Mitchell Co., we need to calculate the proportion of debt relative to the total capital structure. The weight of debt is calculated by dividing the amount of debt by the total capital structure, which includes debt, preferred stock, and common equity.

Weight of debt = Debt / (Debt + Preferred Stock + Common Equity)

In this case, the total capital structure is $2.3 million + $3 million + $3.3 million = $8.6 million. So the weight of debt is $2.3 million / $8.6 million = 0.267.

Therefore, the weight of debt for Mitchell Co. is 0.27.