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Fiesta28 [93]
4 years ago
15

Paper Exchange has 80 million shares of common stock outstanding, 60 million shares of preferred stock outstanding, and 50 thous

and bonds. If the common shares are selling for $20 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 105 percent of par, what would be the weight used for preferred stock in the computation of Paper's WACC?
Business
1 answer:
Dmitriy789 [7]4 years ago
7 0

Answer:

26.64%

Explanation:

Common stocks outstanding (C) = 80 million

Preffered stock outstanding (P) = 60 million

Number of bonds (B) = 50,000

Cost of common stock (Cc) = $20 per share

Cost of Preffered stock (Cp) = $10 per share

Cost of bond (Cb) = 105% of par

Weight of preferred stock :

(P * Cp) / [(P*Cp) + (C*Cc) + (B * Cb * par value)]

(60mill * $10) / [(60mill * $10) + (80mill * $20) + (50000 * 1.05 * 1000)]

600mill / (600 mill + 1600mill + 52.5mill)

600,000,000 / 2252500000

= 0.2663706

= 26.64%

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Explanation:

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