​(Defining capital structure​ weights) In August 2015 the capital structure of the Emerson Electric Corporation​ (EMR) (measured in book and market​ values) was as​ follows:($ Millions)         Book Value   Market ValueShort-term debt  $2,553          $2,553Long-term debt  $4,289           $4,289Common equity  $8,081           $35,690Total capital         $14,923         $42,532A). The appropriate weight of​ debt, wd​, is      ​%. ​(Round to one decimal​ place.)B). The appropriate weight of common​ equity, wcs​, is       ​%. ​(Round to one decimal​ place.)

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Asked Nov 18, 2019
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​(Defining capital structure​ weights) In August 2015 the capital structure of the Emerson Electric Corporation​ (EMR) (measured in book and market​ values) was as​ follows:

($ Millions)         Book Value   Market Value
Short-term debt  $2,553          $2,553
Long-term debt  $4,289           $4,289
Common equity  $8,081           $35,690
Total capital         $14,923         $42,532

A). The appropriate weight of​ debt, wd​, is      ​%. ​(Round to one decimal​ place.)


B). The appropriate weight of common​ equity, wcs​, is       ​%. ​(Round to one decimal​ place.)

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Step 1

It is better to consider market value instead of book value. The valuation of a company is based on stock market, if market values are used in calculation. Assets of the company are also accounted on the basis of their market price.

The formula to calculate weight of debt is given below:

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Short term debt +Long term debt Total capital Weight of debt

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Step 2

Substitute $2,553 for short term debt, $4,289 for long term debt and $42,532 for total capital in the above formula,

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$2,553+ $4,289 Weight of debt = $42,532 $6,842 $42,532 =16.1 %

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Step 3

The formula to calculate weight of c...

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Common equity Total capital Weight of common equity

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