Team Sports has 6 million shares of common stock outstanding

Team Sports has 6 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 200 thousand bonds ($1,000 par). If the common shares are selling for $24.50 per share, the preferred share are selling for $20 per share, and the bonds are selling for 65 percent of par, what would be the weight used for equity in the computation of Team\'s WACC?

Solution

1 million preference stock selling at 20 per share

6 million common shares selling at 24.50 per share

200000 bonds at 1000 selling at 65 per bond

Let us compute weight x number

preference shares = 20 millions

equity                 = 147

Bonds                 = 1300

Weight for equity = 147/1467