Smith and Weston has 55,000 shares of common stock outstanding at a price of $31

Question

Smith and Weston has 55,000 shares of common stock outstanding at a price of $31 a share. It also has 3,000 shares of preferred stock outstanding at a price of $62 a share. The firm has 8 percent, 12-year bonds outstanding with a total face value of $400,000. The bonds are currently quoted at 101.2 percent of face and pay interest semiannually. What is the capital structure weight of the firm's preferred stock if the tax rate is 35 percent?

8.10 percent

15.20 percent

15.67 percent

16.84 percent

17.63 percent

Explanation / Answer

Total Market value = (55000*31)+(3000*62)+(400000*1.012) = $2295800

Weight of firms preferred stock = (3000*62)*100/2295800 = 8.10%

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.