Answered

Discover the answers to your questions at Westonci.ca, where experts share their knowledge and insights with you. Ask your questions and receive precise answers from experienced professionals across different disciplines. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

The Sealing Company has 1,500 bonds outstanding that are selling for $1,060 each. The company also has 5,000 shares of preferred stock at a market price of $32 each. The common stock is priced at $26 a share and there are 36,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital?

Sagot :

anthougo

The weight of the common stock as it relates to the firm's weighted average cost of capital is 35%.

What is the weighted average cost of capital?

The weighted average cost of capital computes a firm's cost of capital based on the firm's average cost of capital from all sources: common stock, preferred stock, bonds, and other forms of debt.

The weight of the common stock can be determined by dividing the common stock market value by the total capitalization from all sources.

Data and Calculations:

Outstanding:

Bonds payable = $1,590,000 (1,500 x $1,060)

Preferred stock = $160,000 (5,000 x $32)

Common stock = $936,000 (36,000 x $26)

Total debts and equity = $2,686,000

Weight of common stock = 35% ($936,000/$2,686,000 x 100)

Thus, the weight of the common stock as it relates to the firm's weighted average cost of capital is 35%.

Learn more about the weighted average cost of capital at https://brainly.com/question/14703616

Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.