Below is the table for the calculations:
Capital Source | Number | Price | Value | Weight |
Debt | 1200 | 990 | $1,188,000 | 0.52 or 52% |
Preference stock | 2500 | 28 | $70,000 | 0.03 or 3% |
Common stock | 28000 | 37 | $1,036,000 | 0.45 or 45% |
$2,294,000 | 1 or 100% |
Total Value = sum of all the values
Total Value = 1188000+70000+1036000 = 2294000
Now we calculate the weights:
So the weight of common equity is 45% and the correct option is option B
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OMG inc. has 5 million shares of common stock outstanding, 4
million shares of preferred stock outstanding, and 6,000 bonds.
Suppose the common shares are selling for $19 per share, the
preferred shares are selling for $28 per share, and the bonds are
selling for 108 percent of par.
What would be yhe weight used for equity in the computation of
OMG's WACC? (Round answer to 2 decimal places.)
Can someone explain how you got your answer please?
OMG Inc....
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