Question

Carrie D's has 6.8 million shares of common stock outstanding, 2.8 million shares of preferred stock outstanding, and 18.00 thousand bonds. If the common shares are selling for $15.80 per share, the preferred share are selling for $28.80 per share, and the bonds are selling for 108.92 percent of par, what would be the weight used for equity in the computation of Carrie D's WACC?

Answer 1

0.5173 or 51.73%

Step-by-step explanation:

To calculate the weight of equity I capital, first we need to calculate total calculate total capital .

Total Capital:

= (Price of stock × number o/s share o/s) + (Price of preferred stock × number of preferred stock) + (number of bonds × price of bond)

Let’s put all the values in the formula

Total capital = 6,800,000 × $15.80 + 2,800,000 × 28.8 + 18,000 × 1089.2

= 107,440,000 + 80,640,000 + 19,605,600

= 207,685,600

Weight of equity in capital = Total equity ÷ Total capital

= 107,440,000 ÷ 207,685,600

= 0.5173 or 51.73%