To determine the percentage of equity used by McCann Catching, Inc., we first need to calculate the total value of the firm, which is the sum of equity and debt.
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Calculate Equity Value:
- Number of shares outstanding = 2.00 million
- Stock price per share = $12.85
- Equity Value = Number of shares * Stock Price \[ Equity\ Value = 2,000,000 , \text{shares} \times 12.85 , \text{USD/share} = 25,700,000 , \text{USD} \]
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Calculate Debt Value:
- Total face value of debt = $13.00 million
- Current market price of debt = 89.00% of face value
- Debt Value = Face Value * Current Market Price % \[ Debt\ Value = 13,000,000 , \text{USD} \times 0.89 = 11,570,000 , \text{USD} \]
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Calculate Total Value of the Firm: \[ Total\ Value = Equity\ Value + Debt\ Value \] \[ Total\ Value = 25,700,000 , \text{USD} + 11,570,000 , \text{USD} = 37,270,000 , \text{USD} \]
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Calculate the Percentage of Equity: \[ \text{Percentage of Equity} = \left(\frac{Equity\ Value}{Total\ Value}\right) \times 100 \] \[ \text{Percentage of Equity} = \left(\frac{25,700,000}{37,270,000}\right) \times 100 \approx 68.91% \]
Thus, the percentage of equity used by McCann Catching, Inc. is approximately 68.91%.