Question

Further From Center has 10,700 shares of common stock outstanding at a price of $41 per share. It also has 240 shares of preferred stock outstanding at a price of $92 per share. There are 570 bonds outstanding that have a coupon rate of 6 percent paid semiannually. The bonds mature in 22 years, have a face value of $1,000, and sell at 104.5 percent of par. What is the capital structure weight of the preferred stock?

Answer 1

capital structure weight is = 0.349

Step-by-step explanation:

Given data:

Number of share 10,700

per share price is $41

number of share of stock is 240

per share price of preferred stock is $92

number of bonds 570

coupon rate is 6% paid semiannually

mutuarity life of bonds is 22 year

face value of bonds is $1000

selling price 104.5% per par

common stock
`= 10,700 * $41 = 438,700`

Preferred stock
`= 240* 92 = 222,080`

Bonds
`= 570* 1000* 1.045  = 595,650`

Total amount = 438,700 + 222,080+595,650 = 1,256,430

capital structure weight is
`= (438,700)/(1,256,430) = 0.349`