Western Electric has 23,000 shares of common stock outstanding at a price per sh

Question

Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49 percent.

What is the capital structure weight of the firm's preferred stock?

9.89%

14.72%

21.57%

28.26%

9.89%

14.72%

21.57%

28.26%

Explanation / Answer

Stock Number Market Value per share Market Value Weight Common Stock                       23,000.00                     57.00         1,311,000.0000                          0.6702 Preffered Stock Price                         6,000.00                     48.00             288,000.0000                          0.1472 Bond                             350.00               1,020.00             357,000.0000                          0.1825                       29,350.00         1,956,000.0000                          1.0000 Weight of preffered Stock is 14.72% as shown above

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