Question

Further From Center has 10,700 shares of common stock outstanding at a price of $41 per share. It also has 240 shares of preferred stock outstanding at a price of $92 per share. There are 570 bonds outstanding that have a coupon rate of 6 percent paid semiannually. The bonds mature in 22 years, have a face value of $1,000, and sell at 104.5 percent of par. What is the capital structure weight of the preferred stock?

Answer 1

Answer:

capital structure weight is = 0.349

Explanation:

Given data:

Number of share 10,700

per share price is $41

number of share of stock is 240

per share price of preferred stock is $92

number of bonds 570

coupon rate is 6% paid semiannually

mutuarity life of bonds is 22 year

face value of bonds is $1000

selling price 104.5% per par

common stock $= 10,700 \times 41 = 438,700$

Preferred stock  $= 240\times 92 = 222,080$

Bonds $= 570\times 1000\times 1.045 = 595,650$

Total amount = 438,700 + 222,080+595,650 = 1,256,430

capital structure weight is $= \frac{438,700}{1,256,430} = 0.349$