FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $25 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 97 percent of par. What would be the weight used for equity in the computation of FarCry's WACC? (Round your answer to 2 decimal places.)

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Business

Carroll

18 September, 08:06

FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $25 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 97 percent of par. What would be the weight used for equity in the computation of FarCry's WACC? (Round your answer to 2 decimal places.)

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Korbin Cummings · Answer 1

72.93%

Explanation:

The computation of weight used for equity is shown below:-

Value of common stock = common stock outstanding * sold common share

= 5,000,000 * $25

= $125,000,000

Value of preferred stock = preferred stock outstanding * sold preferred shares

2,000,000 * $13.50

= $27,000,000

So, Value of bonds = 20,000 * $1,000 * 0.97

= $19,400,000

Total = $125,000,000 + $27,000,000 + $19,400,000

= $171,400,000

Now, Weight of Equity = $125,000,000 : $171,400,000

= 72.93%