Vandelay Industries has 125,000 shares of common stock outstanding at a price of
ID: 2705598 • Letter: V
Question
Vandelay Industries has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8% bonds outstanding that are priced at 99% of face value. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferred stock? Answer a. 13.67% b. 9.98% c. 7.68% d. 17.77% e. 8.26% Vandelay Industries has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8% bonds outstanding that are priced at 99% of face value. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferred stock? Vandelay Industries has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8% bonds outstanding that are priced at 99% of face value. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferred stock? 13.67% 9.98% 7.68% 17.77% 8.26% a. 13.67% b. 9.98% c. 7.68% d. 17.77% e. 8.26%Explanation / Answer
Correct answer is (e) 8.26%
Wt of preferred stock= (25,000x55)/[(125,000x43)+(25,000x55)+(10,000x990)]= 8.26%
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