Homework SourseFarCry Industries a maker of telecommunications equipment ha
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares are selling for $26 per share, the preferred shares are selling for $14.00 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.)
| FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares are selling for $26 per share, the preferred shares are selling for $14.00 per share, and the bonds are selling for 97 percent of par. |
Solution
Weight for equity for WACC = Value of equity / Total Capital
= 52,000,000 / 75,700,000
Weight for equity for WACC = 68.69%
.
Working for each instrument value:
Particulars
Price
Quantity
Price x Quantity
Weight
Debt
970.00
10000
9,700,000.00
12.81%
Preferred Share
14.00
1000000
14,000,000.00
18.49%
Equity
26.00
2000000
52,000,000.00
68.69%
Total Capital
75,700,000.00
| Particulars | Price | Quantity | Price x Quantity | Weight |
| Debt | 970.00 | 10000 | 9,700,000.00 | 12.81% |
| Preferred Share | 14.00 | 1000000 | 14,000,000.00 | 18.49% |
| Equity | 26.00 | 2000000 | 52,000,000.00 | 68.69% |
| Total Capital | 75,700,000.00 |
