Question

Landmoon Inc. has 10,800 shares of common stock outstanding at a price of $42 per share. It also has 245 shares of preferred stock outstanding at a price of $93 per share. There are 580 bonds outstanding that have a coupon rate of 6.1 percent paid semiannually. The bonds mature in 23 years, have a face value of $1,000, and sell at 105 percent of par. What is the capital structure weight of the preferred stock?

Answer 1

0.0210

Step-by-step explanation:

The computation of the weight of the preferred stock is shown below:

Particulars Shares Price Value ( Shares × Price) Weight ( Value ÷Total value)

Equity 10,800 $42 $4,53,600 0.4179

Preferred Stock 245 $93 $22,785 0.0210

Bonds 580 $1,050 $6,09,000 0.5611

Total value $1,085,385

for computing the weight we simply divide the value of the preferred stock with the total value