Question

Tom and Jerry's has 2.4 million shares of common stock outstanding, 2.4 million shares of preferred stock outstanding, and 14.00 thousand bonds. If the common shares are selling for $13.40 per share, the preferred share are selling for $10.40 per share, and the bonds are selling for 99.96 percent of par, what would be the weight used for common stock in the computation of Tom and Jerry's WACC

Answer 1

Tom and Jerry's

The weight used for common stock in the computation of Tom and Jerry's WACC is:

= 45.22%

Step-by-step explanation:

a) Data and Calculations:

Common Preferred Bonds

Stock Stock

Outstanding number 2.4 m 2.4 m 14,000

Market price per share $13.40 $10.40 $999.6

Total value $32.16 m $24.96 m $13,994,400

Total value of stock and bonds = $71,114,400

Weight of common stock = $32.16/$71.1144 * 100 = 45.22%