Question

JackITs has 5.0 million shares of common stock outstanding, 1.0 million shares of preferred stock outstanding, and 20.00 thousand bonds. If the common shares are selling for $28.00 per share, the preferred share are selling for $13.50 per share, and the bonds are selling for 98.00 percent of par, what would be the weight used for equity in the computation of JackIT's WACC?

Answer 1

80.88; 7.80; 11.32

Step-by-step explanation:

Common Stock:

Value = Number × Price

= 5,000,000 × $28

= $140,000,000

Preferred Stock:

Value = Number × Price

= 1,000,000 × $13.50

= $13,500,000

Bonds:

Value = Number × Price

= 20,000 × $980

= $19,600,000

Total value = $140,000,000+ $13,500,000 + $19,600,000

= 173,100,000

Weight of common stock = Respective Value ÷ Total Value

= $140,000,000 ÷ 173,100,000

= 80.88

Weight of preferred stock = Respective Value ÷ Total Value

= $13,500,000 ÷ 173,100,000

= 7.80

Weight of Bonds = Respective Value ÷ Total Value

= $19,600,000 ÷ 173,100,000

= 11.32