Question

Kay's Bridal Shoppe has 4000 shares of common stock outstanding at a price of $13 a share it also has 500 shares of preferred stock outstanding at a price of $22 a share there are 50 bonds outstanding that have a semi-annual coupon payment of $25 the Bonds mature in 4 years have a face value of $1,000 and salt at 98% of par what is the capital structure weight of the common stock

Answer 1

Answer:

46.43 percent

Explanation:

the capital structure weight of the common stock= Common stock value/

Preferred stock value +Common stock value+debt value

To determine the common stock= price× total shares of common stock

=(4000 shares of common stock × $13 )

=$52000

Preferred stock value= ( 500 shares of preferred stock × outstanding price of $22)=$11000

50 bonds outstanding

We have Bonds which mature in 4 years have a face value of $1,000 and salt at 98% of par , then the

98% of 1000= 98/100 ×1000=$980

Debt incurred= 50 bonds outstanding×$980

=$49000

the capital structure weight of the common stock= Common stock value/

Preferred stock value +Common stock value+debt value

= $52,000/(49000+52,000 + 11000) ×100%

=46.43 percent