Question

XYZ Co. has 4,400 bonds with a price of $925, 15,000 shares of preferred stock with a price of $55, and 250,000 share of common stock with a selling price of $32. . Calculate the capital structure weights of bonds, preferred stock, and common stock, respectively. XYZ Co. has 4,400 bonds with a price of $925, 15,000 shares of preferred stock with a price of $55, and 250,000 share of common stock with a selling price of $32. . Calculate the capital structure weights of bonds, preferred stock, and common stock, respectively. 42.5%, 21.4%, 36.1% 31.6%, 6.4%, 62.0% 38.0%, 10.2%, 51.8% 52.4%, 8.6%, 39%

Answer 1

31.6%, 6.4%, 62.0%

Step-by-step explanation:

The computation of weighted of capital structure is shown below:

But before that first determined the total value

Total value of bonds is

= (4,400 × $925)

= $4,070,000

Total value of preferred stock is

= 15,000 × $55

= $825,000

ANd,

Total value of common stock is

= 250,000 × 32

= $8,000,000

Now

Total value is

= $4,070,000 + $825,000 + $8,000,000

= 12,895,000

Now weight of each of is

For Bonds is

= $4,070,000 ÷ $12,895,000

= 31.6%

For Preferred stock

= $825,000 ÷ $12,895,000

= 6.4%

And,

Common stock is

= $8,000,000 ÷ $12,895,000

= 62%