fin 305 ch 11 q 9 FarCry Industries, a maker of telecommunications equipment, ha

Question

fin 305 ch 11 q 9

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 would be the weight used for equity in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)

What would be the weight used for equity in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)

Explanation / Answer

Weight used for equity will be (market value of equity / Market value of debt)

Here it is important to note that commom and preferred stock are both the part of equity. 120000000+26000000= 146000000 will be the total equity amount and this value will be taken in calculating the WACC.

Particulars No of shares(A) Value(B) per share Market value (A*B) $ Commmon Stock 5000000 $24 120000000 Preferred Stock 2000000 $13 26000000 Bond 20000

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