Final answer:
The weight of equity is calculated as the market value of the common stock divided by the total market value of the firm.
Step-by-step explanation:
The weight of equity is important in calculating the firm's weighted average cost of capital (WACC). The WACC is a measure used to determine the cost of capital for a company.
It is calculated by using the proportion of equity and debt in the company's capital structure weighted by their respective costs.
To calculate the weight of equity, you need to know the market value of the common stock and the total market value of the firm. In this case, the market value of the common stock is 44,000 shares * $32 per share = $1,408,000.
The total market value of the firm is the sum of the market values of the common stock, preferred stock, and bonds, which is $1,408,000 + (7,500 shares * $92 per share) + (825 bonds * $989 per bond) = $9,845,125.
The weight of equity can then be calculated as the market value of the common stock divided by the total market value of the firm, which is $1,408,000 / $9,845,125 = 0.143 or 14.3%.