Question

dee's dress emporium has 50,000 shares of common stock outstanding at a price of $27 a share. it also has 1,000 shares of preferred stock outstanding at a price of $20 a share. there are 800 bonds outstanding that have a semiannual coupon payment of $25. the bonds mature in four years, have a face value of $1,000, and sell at 97 percent of par. what is the capital structure weight of the common stock?

Answer 1

The capital structure weight of the common stock of Dee's Dress Emporium is 62.9%.

Step-by-step explanation:

The capital structure weight of the common stock can be calculated by dividing the value of the common stock by the total value of the company's capital structure.

Given that Dee's Dress Emporium has 50,000 shares of common stock outstanding at a price of $27 per share, the value of the common stock is 50,000 * $27 = $1,350,000.

The total value of the company's capital structure is the sum of the value of common stock, preferred stock, and bonds. The value of the preferred stock is 1,000 * $20 = $20,000. The value of the bonds can be calculated by multiplying the number of bonds by the price at which they sell and then by the face value. In this case, the value of the bonds is 800 * 0.97 * $1,000 = $776,000.

Therefore, the total value of the company's capital structure is $1,350,000 + $20,000 + $776,000 = $2,146,000.

The capital structure weight of the common stock is then calculated as (value of common stock / total value of capital structure) * 100%. In this case, it would be ($1,350,000 / $2,146,000) * 100% = 62.9%.