Question

K's Bridal Shoppe has 3,067 shares of common stock outstanding at a price of $17 a share. It also has 510 shares of preferred stock outstanding at a price of $21 a share. There are 64 bonds outstanding that have a semiannual coupon payment of $30. 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

41.73%

Step-by-step explanation:

The solution of the capital structure weight of the common stock is provided below:-

To reach the capital structure weight of the common stock we need to find out the total of capital base and issue value of common stock is here below:-

Total of Capital Base = Value of Common stock on issue + Value of preferred stock on issue + Value of Bond on issue (after discount)

= (3,067 × $17) + (510 × $21) + 64 × ($1,000 × 97%)

= $52,139 + $10,710 + 64 × $970

= $52,139 + $10,710 + $62,080

= $124,929

Issue on Value of Common Stock = 3,067 × $17

= $52,139

Capital structure weight of the common stock = Issue on Value of Common Stock ÷ Total of Capital Base

= $52,139 ÷ $124,929

= 41.73%

Therefore, we put the values to find out the Capital structure weight of the common stock.