WhackAmOle has 3 million shares of common stock outstanding, 2.0 million shares

Question

WhackAmOle has 3 million shares of common stock outstanding, 2.0 million shares of preferred stock outstanding, and 75,000 bonds. Assume the common shares are selling for $63 per share, the preferred shares are selling for $57.00 per share, and the bonds are selling for 103 percent of par. What would be the weights used in the calculation of WhackAmOle’s WACC? (Do not round intermediate calculations and round your answers to 2 decimal places.) Equity weight % Preferred stock weight % Debt weight %

Explanation / Answer

Value of common stock = 3million * 63 = 189000000

Value of preferred stock = 2million *57 = 114000000

Value of debt = 75000*103%*1000 = 77250000

Total value = 189000000 + 114000000 + 77250000 = 380250000

Equity weight = Value of equity/total value = 189000000/380250000 = 0.5 = 50%

Preferred stock weight = Value of preferred stock/Total value = 114000000/380250000 = 0.3 = 30%

Debt weight = Value of debt/total value = 77250000/380250000 = 0.2 = 20%

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