Question

Spock Enterprises has a market value of $100 million in debt outstanding. They also have a market value of equity of $400 million. Shareholders require a 12% return on their shares and creditors require a 7% before-tax return on their investment. The weighted average return required by investors in Spock Enterprises is Blank______%.

Answer 1

The weighted average return required by investors in Spock Enterprises is Blank 0.11%. The answer is 0.11%. Read below about weighted average return.

How does one calculate weighted average return?

One calculate a weighted average by multiplying its relative proportion or percentage by its value in sequence and adding those sums together. Consequently, supposing a portfolio has 65% stocks, 50% bonds, and 10% cash, those weights would be multiplied by their annual performance to get a weighted average return.

Therefore, (0.2x0.07) + (0.8x0.12) = 0.11 and as a result the answer is 0.11%

learn about weighted average return: https://brainly.com/question/17145780

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