Using the author’s suggested process of ignoring short term capital, w

Using the author’s suggested process of ignoring short term capital, what are the book value weights for the component costs of capital for Bacon Signs?

A) LTD = 36.4% and Equity = 63.6%
B) LTD = 56.7% and Equity = 43.3%
C) LTD = 50.4% and Equity = 49.6%
D) LTD = 41.0% and Equity = 59.0%

ANSWER

A
Explanation: A) LTD% = LTD/(LTD + E) and E% = E/(LTD + E) = 5,500/15,120 = 36.4% and 9,620/15,120 = 63.6%.