Answer:
Weight of the common stock = 45%
Explanation:
<em>WACC is the average cost of a company long-term sources of finance. Each source is weighted according to the proportion of its market value to the total market value of the pool of funds.</em>
To calculate the weighted of the common stock , we will follow the steps
below:
Step 1
<em>Calculate the total market value of all the sources of fund</em>
Market value of common stock
Bonds = $990 × 1,200 = $ 1,188,000
Preferred Stock = $28 × 2500 =$70,000
Common stock = $37 × 28,000 =$1,036,000
Total market value = 1,188,000+ 70,000 + 1,036,000
$2,294,000.00
Step 2
<em>Calculate the weight of common stock</em>
Weight of the common stock = ($1,036,000/ $2,294,000.00 ) × 100
= 45%
Weight of the common stock = 45%
