BetterPie Industries has 8 million shares of common stock outstanding, 6 million

Question

BetterPie Industries has 8 million shares of common stock outstanding, 6 million shares of preferred stock outstanding, and 25,000 bonds. Assume the common shares are selling for $47 per share, the preferred shares are selling for $24.50 per share, and the bonds are selling for 99 percent of par.

What would be the weights used in the calculation of BetterPie

BetterPie Industries has 8 million shares of common stock outstanding, 6 million shares of preferred stock outstanding, and 25,000 bonds. Assume the common shares are selling for $47 per share, the preferred shares are selling for $24.50 per share, and the bonds are selling for 99 percent of par.

Explanation / Answer

Hi,

Please find the answer as follows;

Value of Common Stock = 8000000*47 = 376000000

Value of Preferred Stock = 6000000*24.50 = 147000000

Value of Bonds = 25000*1000*99% = 24750000

Total Value = 376000000 + 147000000 + 24750000 = 547750000

Equity Weight = 376000000/547750000*100 = 68.64%

Preferred Stock Weight = 147000000/547750000*100 = 26.84%

Debt Weight = 24750000/547750000*100 = 4.52%

Thanks.

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