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 $60 per share, the preferred shares are selling for $53.00 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?

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 $60 per share, the preferred shares are selling for $53.00 per share, and the bonds are selling for 103 percent of par.

Explanation / Answer

the following table shows the weights for calculation of Whack AMole's WACC.

($77.25/363.25)=>21.27%

SOurce Outstanding amount Weight (outstanding amount / total outstanding amount) common stock (3.0 million shares * $60 per share) =>$180 million ($180 / 363.25)=>49.55% preferred stock (2.0 million shares* $53 per share) =>$106 million ($106 / 363.25)=>29.18% Bonds (75,000 bonds * $1000*103%)=>$77.25 million

($77.25/363.25)=>21.27%

Total outstanding amount of all sources (180 + 106 + 77.25)=>$363.25 million

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