Denver Interiors has 64,000 shares of common stock outstanding at a price per sh
ID: 2798076 • Letter: D
Question
Denver Interiors has 64,000 shares of common stock outstanding at a price per share of $42. The firm also has 22,000 shares of preferred stock outstanding at a price per share of $51. There are 1,900 outstanding bonds with a face value of $1,200 and a price quote of 99.8. What is the capital structure weight of the preferred stock?
16.75 percent
18.97 percent
18.44 percent
19.26 percent
Denver Interiors has 64,000 shares of common stock outstanding at a price per share of $42. The firm also has 22,000 shares of preferred stock outstanding at a price per share of $51. There are 1,900 outstanding bonds with a face value of $1,200 and a price quote of 99.8. What is the capital structure weight of the preferred stock?
Explanation / Answer
Total value of:
Common stock=(64000*42)=$2,688,000
Preferred stock=(22000*51)=$1,122,000
Bonds=(1900*(1200*99.8%))=$2,275,440
Total=$6,085,440
Hence capital structure weight of the preferred stock=(1,122,000/6,085,400)
which is equal to=18.44%(Approx)
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