Questions: If the total market value of a company's stock were calculated as 140 million and the total market value of the company's debt were calculated as 40 million, then the combined value would be 180 million. Calculate the firm's financing percent. 1) 78 % 2) 87 % 3) 22 % 4) 29 %

Solution Steps

The total market value of the company is the sum of the market value of its stock and the market value of its debt. Given:

• Market value of stock = \$140 million
• Market value of debt = \$40 million

The combined total market value is:

\[ \text{Total Market Value} = 140 + 40 = 180 \text{ million dollars} \]

The financing percent is typically calculated as the proportion of the company's stock value to the total market value. This can be expressed as:

\[ \text{Financing Percent} = \left( \frac{\text{Market Value of Stock}}{\text{Total Market Value}} \right) \times 100\% \]

Substituting the given values:

\[ \text{Financing Percent} = \left( \frac{140}{180} \right) \times 100\% = 77.7778\% \]

Rounding 77.7778% to the nearest whole number gives us 78%.

Final Answer