Carrie D's has 6.8 million shares of common stock outstanding, 2.8 million shares of preferred stock outstanding, and 18.00 thousand bonds. If the common shares are selling for $15.80 per share, the preferred share are selling for $28.80 per share, and the bonds are selling for 108.92 percent of par, what would be the weight used for equity in the computation of Carrie D's WACC?

Question

Business

Bronson

23 August, 04:10

Carrie D's has 6.8 million shares of common stock outstanding, 2.8 million shares of preferred stock outstanding, and 18.00 thousand bonds. If the common shares are selling for $15.80 per share, the preferred share are selling for $28.80 per share, and the bonds are selling for 108.92 percent of par, what would be the weight used for equity in the computation of Carrie D's WACC?

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Matthias Kelley · Answer 1

0.5173 or 51.73%

Explanation:

To calculate the weight of equity I capital, first we need to calculate total calculate total capital.

Total Capital:

= (Price of stock * number o/s share o/s) + (Price of preferred stock * number of preferred stock) + (number of bonds * price of bond)

Let's put all the values in the formula

Total capital = 6,800,000 * $15.80 + 2,800,000 * 28.8 + 18,000 * 1089.2

= 107,440,000 + 80,640,000 + 19,605,600

= 207,685,600

Weight of equity in capital = Total equity : Total capital

= 107,440,000 : 207,685,600

= 0.5173 or 51.73%