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Kim's Bridal Shoppe has 11,500 shares of common stock outstanding at a price of $49 per...

Kim's Bridal Shoppe has 11,500 shares of common stock outstanding at a price of $49 per share. It also has 280 shares of preferred stock outstanding at a price of $91 per share. There are 310 bonds outstanding that have a coupon rate of 6.8 percent paid semiannually. The bonds mature in 30 years, have a face value of $2,000, and sell at 108.5 percent of par. What is the capital structure weight of the common stock?

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Answer #1

Answer:

Common Stock:

Number of shares outstanding = 11,500
Current Price = $49

Value of Common Stock = 11,500 * $49
Value of Common Stock = $563,500

Preferred Stock:

Number of shares outstanding = 280
Current Price = $91

Value of Preferred Stock = 280 * $91
Value of Preferred Stock = $25,480

Debt:

Number of bonds outstanding = 310
Face Value = $2,000
Current Price = 108.50% * $2,000 = $2,170

Value of Debt = 310 * $2,170
Value of Debt = $672,700

Value of Firm = Value of Common Stock + Value of Preferred Stock + Value of Debt
Value of Firm = $563,500 + $25,480 + $672,700
Value of Firm = $1,261,680

Weight of Common Stock = $563,500 / $1,261,680
Weight of Common Stock = 44.66%

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