OMG Inc has 5 million shares of common stock outstanding 4 m

OMG Inc. has 5 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 6,000 bonds. Suppose the common shares are selling for $19 per share, the preferred shares are selling for $28 per share, and the bonds are selling for 108 percent of par. What would be the weight used for equity in the computation of OMG’s WACC?

Solution

Weight of equity=
Total equity/(Equity+Value of Preferred stock + Value of Bond
=5*19/(5*19+4*28+.006*1080)

=95/(95+112+6.48
=95/213.48
=.45

Par value of bond assumed as $1000