Homework SourseFarCry Industries a maker of telecommunications equipment ha
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 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 99 percent of par.
What weight should you use for debt in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)
| FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 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 99 percent of par. |
Solution
Total value of common stock=(6*27)=$162million
Total value of preferred stock=(4*14.5)=$58million
Total value of bonds=45000*(1000*99%)=$44.55million
Total value =$264.55million
Hence weight of debt=(44.55million/264.55million)
which is equal to
=16.84%(Approx).
