Question

the panther store has 11,000 shares of common stock outstanding at a price of $44 per share. it also has 255 shares of preferred stock outstanding at a price of $86 per share. there are 600 bonds outstanding that have a coupon rate of 6.3 percent paid semiannually. the bonds mature in 25 years, have a face value of $1,000, and sell at 106 percent of par. what is the capital structure weight of the common stock?

Answer 1

The capital structure weight of the common stock is the proportion of the common stock's market value in the total market value of the firm's securities. The common stock has a market value of $484,000, but the total market value cannot be calculated without the values of preferred stock and bonds.

Step-by-step explanation:

The capital structure weight of the common stock is calculated by determining the proportion of the total market value of all securities (common stock, preferred stock, and bonds) that the market value of the common stock represents.

To find the capital structure weight of the common stock, we need to calculate the market value of the common stock, which is the number of shares multiplied by the price per share.

The Panther Store has 11,000 shares of common stock at a price of $44 per share, giving a market value of $484,000 for the common stock. We would then add the market value of the preferred stock and the bonds to get the total market value of all securities.

However, without the market values of the preferred stock and bonds provided in the question, we cannot complete the calculation.

The given information about bond yield and price shifts due to interest rates is not directly relevant to the calculation of the capital structure weight of the common stock.