(Defining capital structure weights) Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $440 million. Since the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing, but Templeton plans to borrow $340 million and invest only $90 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition? (Round to one decimal place.)
- What is the appropriate weight of debt?
- What is the appropriate weight of common equity?