Can you show me how please FarCry Industries, a maker of telecommunications equi

Question

Can you show me how please

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 $27 per share, the preferred shares are selling for $14.50 per share, and the bonds are selling for 98 percent of par.

What weight should you use for debt in the computation of FarCry

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 $27 per share, the preferred shares are selling for $14.50 per share, and the bonds are selling for 98 percent of par.

Explanation / Answer

Hi,

Please find the answer as follows:

Market Value of Equity = 3000000*27 = 81000000

Market Value of Debt = 10000*1000*98% = 9800000

Market Value of Preferred Stock = 1000000*14.50 = 14500000

Total Market Value = 81000000 + 9800000 + 14500000 = 105300000

Weight of Debt = 9800000/105300000*100 = 9.31%

Answer is 9.31%.

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.