w_debt: What is the weight of debt used in your WACC calculation (if applicable)? If debt is not applicable to your analysis, then enter "0" as your answer. Submit your answer in percentage points, rounded to one decimal place. E.g., 50.92% would be submitted as 50.9

Question

w_debt: What is the weight of debt used in your WACC calculation (if applicable)? If debt is not applicable to your analysis, then enter "0" as your answer. Submit your answer in percentage points, rounded to one decimal place. E.g., 50.92% would be submitted as 50.9

BlackTom AI · Accepted Answer

The question asks for the weight of debt used in your WACC calculation, in percentage points, rounded to one decimal place. In WACC, the debt weight is typically calculated as the market-value (preferred) or sometimes book-value proportion of debt relative to the total capital (debt + equity) used in the firm, depending on the methodology chosen.

Key concept to consider:
- Definition: Debt weight = Debt / (Debt + Equity). If you are using market values, you would replace Debt and Equity with their market values; some analyses use book values, especially for accounting purposes. The exact denominator should reflect the capital structure actually used in the WACC calculation.
- If debt is not applicable to the analysis: you should enter 0.0 (as a percentage point) since there is no debt component to weight.
- Rounding: the result must be given in percentage points, with one decimal place. For example, if the computed weight is 0.301, report as 30.1.
- Common pitfalls:
  • Mixing units: ensure you are using the same valuation basis for both debt and equity (both market values or both book values).
  • Including non-operating or off-balance-sheet debt inappropriately can distort the true capital structure.
  • If your WACC formula uses a pre-tax cost of debt but then applies tax shields, make sure the debt weight corresponds to the same capital structure input used in the cost terms.

In this specific case, the provided answer is 30.1, which implies a calculated debt weight of 0.301, i.e., 30.1% of the total capital. If this aligns with your computed Debt ÷ (Debt + Equity) using the valuation method you chose (market or book), then 30.1% is the correctly rounded result. If you were told to enter 0 because debt is not applicable, then 0.0 would be appropriate, but that would contradict a nonzero debt structure.

Summary: compute Debt / (Debt + Equity) with consistent valuation, convert to a percentage, and round to one decimal place. If debt truly does not apply to your analysis, use 0.0%. Otherwise, report the rounded percentage, such as 30.1% in this example.

FINA3301.MERGED.202530 Submit Values: Molycorp Part G1 (Individual)--Cost of capital

w_debt: What is the weight of debt used in your WACC calculation (if applicable)? If debt is not applicable to your analysis, then enter "0" as your answer. Submit your answer in percentage points, rounded to one decimal place. E.g., 50.92% would be submitted as 50.9

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