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?

Question

Yosef Rowland

Business

12 May, 16:34

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?

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Lailah Cooley · Answer 1

80.88; 7.80; 11.32

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