Question

Bryant Co. has $2.7 million of debt, $1 million of preferred stock, and $2.1 million of common equity. What would be its weight on preferred stock

Answer 1

0.172

Step-by-step explanation:

The computation of the weight on the preferred stock is shown below:

Weight on preferred stock is

= Preferred stock ÷(Debt + preferred stock + common equity)

= $1 million ÷ ($2.7 million + $1 million + $2.1 million)

= $1 million ÷ $5.8 million

= 0.172

By applying the above formula we can easily determine the weight on preferred stock