4 value: 2.50 points MC Qu. 12 Team Sports has v1 million shares of common stock

Question

4 value: 2.50 points MC Qu. 12 Team Sports has v1 million shares of common stock outstanding, v... Team Sports has 4.7 million shares of common stock outstanding, 2.7 million shares of preferred stock outstanding, and 27 thousand bonds. If the common shares are selling for $3.70 per share, the preferred share are selling for $15.7 per share, and the bonds are selling for 98.93 percent of par, what would be the weight used for equity in the computation of Team's WACC? ? 25.17% ? 33.33% ? 20.11% ? 63.28%

Explanation / Answer

20.11%

Working:

a. Quantity Price per unit Total Value Common Stock         47,00,000 $       3.70 $       1,73,90,000 Preferred Stock         27,00,000 $    15.70 $       4,23,90,000 Bonds               27,000 $ 989.30 $       2,67,11,100 Total $       8,64,91,100 b. Weight of Equity; $ 1,73,90,000 / $ 8,64,91,100 = 20.11%

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