WACC or "Weighted average cost of capital" or "Overall cost of capital" is the calculation of firm's cost of capital in which each category of capital is proportionately weighted.
WACC = We* Ke + Wp*Kp + Wd*Kd
where We= weight of equity Ke= Cost of equity
Wd= Weight of debt Kd= Cost of Debt
Wp= Weight of preferred stock Kp= Cost of preferred stock
The weights can be assigned on three bas is:
1) Historical weight- which can be Book value or market value weights
2) Marginal weight - these are weights incase of new financing
3) Target Weight- These are the weights as expected by company
a) To calculate the weight of equity, we will find the capital structure of the firm
Capital structure= Total equity + Total preferred stock + Total debt
= 2,000,000* 27 + 1,000,000* 14.50 + 10,000* 0.98 * 1000 (par value)
= 54,000,000 + 14,500,000 + 9,800,000 = $ 78,300,000
Cost of Equity = 2,000,000* 27 = $54,000,000
Weight of Equity = $54,000,000/ $ 78,300,000 = 0.6896 or 68.96%
b) To calculate the weight of equity, we will find the capital structure of the firm
Capital structure= Total equity + Total preferred stock + Total debt
= 4,000,000* 17 + 3,000,000* 26 + 5,000* 108% * 1000 (par value)
= 68,000,000 + 780,00,000 + 5,400,000 = $ 151,400,000
Cost of Equity = 4,000,000* 17 = $68,000,000
Weight of Equity = $68,000,000/ $ 151,400,000 = 0.4491 or 44.91%
c) To calculate the weight of debt, we will find the capital structure of the firm
Capital structure= Total equity + Total preferred stock + Total debt
= 2,000,000* 27 + 1,000,000* 14.50 + 10,000* 98% * 1000 (par value)
= 54,000,000 + 14,500,000 + 9,800,000 = $ 78,300,000
Cost of Debt = 10,000* 98% * 1000 (par value) = $ 9,800,000
Weight of Debt = $ 9,800,000/ $ 78,300,000 = 0.1251 or 12.51%
11-10 Weight of Equity, please show formula on excel. OMG Inc. 011) as 2 million share...
can someone please answer asap. i need this before 11:45 Saved Problem 11-11 Weight of Debt (LG11-4) FarCry Industries, a maker of telecommunications equipment, has 3 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 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 weight should you use for debt in the...
1. 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 $26 per share, the preferred shares are selling for $14.00 per share, and the bonds are selling for 97 percent of par. What weight should you use for debt in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.) 2. FarCry Industries, a maker...
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares are selling for $29 per share, the preferred shares are selling for $15.50 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.) Weight used %
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 $29 per share, the preferred shares are selling for $15.50 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 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares are selling for $27 per share, the preferred shares are selling for $14.50 per share, and the bonds are selling for 99 percent of par. What would be the weight used for equity in the computation of FarCry's WACC?
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 $24 per share, the preferred shares are selling for $13.00 per share, and the bonds are selling for 97 percent of par. What weight should you use for debt in the computation of FarCry’s WACC?
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares sell for $27 per share, the preferred shares sell for $14.50 per share, and the bonds sell for 99 percent of par. What weight should you use for preferred stock in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.) Weight used % ____
FarCry's 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 sell for $27 per share, the preferred shares sell for $14.50 per share, and the bonds sell for 98 percent of par. What weight should you use for preferred stock in the computation of FarCry's WACC?
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....
omg inc has 5 million shares of common stock outstanding, 4 million shares of preferred stock outstanding and 6000 bonds. suppose the common share are selling for 25 per share, the preferred shares are selling for 24 per share, and the bonds are selling for 109 percent of par. what weight should use for debt in the computation of omg wacc