Templeton Extended Care Facilities Inc, is considering the acauision of a chain of cemeteries for $450 million. Since the primary asset of the business is real estate, Templeton 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 $360 million and invest only $90 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition? The approximate w/d weigh is ?% Round to one decimal place.

To compute the Weighted Average Cost of Capital (WACC) for the acquisition, Templeton needs to determine the weights of debt and equity. The weights represent the proportion of total financing that each source of capital contributes.

In this case, Templeton plans to borrow $360 million and invest $90 million in equity. Therefore, the weight of debt (w_d) can be calculated by dividing the amount of debt by the total financing:

w_d = Debt / (Debt + Equity) = $360 million / ($360 million + $90 million) = 0.8 or 80%

The weight of equity (w_e) is the complement of the debt weight since there are only two sources of financing:

w_e = 1 - w_d = 1 - 0.8 = 0.2 or 20%

Therefore, Templeton should use a debt weight (w/d weight) of approximately 80% and an equity weight of 20% when computing the WACC for this acquisition.