OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of p

Question

OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $19 per share, the preferred shares are selling for $28 per share, and the bonds are selling for 108 percent of par.

What would be the weight used for equity in the computation of OMG’s WACC? (Round your answer to 2 decimal places.)

OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $19 per share, the preferred shares are selling for $28 per share, and the bonds are selling for 108 percent of par.

Explanation / Answer

Solution.

Calculation of weifht of capital.

Formula for weight calculation for equity = E / E+P+D

Capital No. OF Value Amount Weight Equity 6000000          19.00    114,000,000.000          0.44 Debt 5000000          28.00    140,000,000.000          0.54 Bond 7000    1,080.00         7,560,000.000          0.03 Total    11,007,000      261,560,000.00          1.00

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