TellAII has 10 million shares of common stock outstanding, 20 million shares of

Question

TellAII has 10 million shares of common stock outstanding, 20 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $32 per share, the preferred shares are selling for $20 per share, and the bonds are selling for- 106 percent of par, what would be the weight used for preferred stock in the computation of TellAll's WACC? 33.33% 48.43% 55.55% 66.45% Shares of stock issued to employees that have limitations on when they can be sold. executive stock options privately held Information restricted stock stock market bubble

Explanation / Answer

Answer 1.

Value of Common Stock =10 million * $32 = $ 320 Million

Value of Preferred Stock = 20 million * $20 = $ 400 million

Value of Debenture = 100 thousand * $1,000 * 106% = 10,600 thousand or $ 106 million

Total Value of Capital = 826 million

Weight of Preferred Stock = 400 million / 826 million

Weight of Preferred Stock = 48.43%

Answer 2.

Shares of stock issued to employees that have limitations on when they can be sold restricted stock.

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