FarCry Industries, a maker of telecommunications equipment, has 5 million shares

Question

FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $28 per share, the preferred shares are selling for $15.00 per share, and the bonds are selling for 98 percent of par.

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

FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $28 per share, the preferred shares are selling for $15.00 per share, and the bonds are selling for 98 percent of par.

Explanation / Answer

Weight used =73.84%.

weight = total equity / total of sources of capital *100

the table shows the calcualtion:

Source Amount Weight Equity (5 million * $28)=>$140 million ($140 million / $189.6 million)*100=73.84% preferred equity (2 million*$15)=>$30 millionn Debt (20,000*$1000*98%)=>$19.60 million TOtal $189.6 million

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