Suppose That Lil John Industries' Equity Is Currently Selling for $64

Suppose that Lil John Industries' equity is currently selling for $64 per share and that there are 1 million shares outstanding. If the firm also has 20 thousand bonds outstanding, which are selling at 108 percent of par ($1,000) , what are the firm's current capital structure weights?

A) Weight of Equity = 25.23 percent; Weight of Debt = 74.77 percent
B) Weight of Equity = 84.77 percent; Weight of Debt = 15.23 percent
C) Weight of Equity = 74.77 percent; Weight of Debt = 25.23 percent
D) Weight of Equity = 32.23 percent; Weight of Debt = 67.77 percent

Correct Answer:

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