Question

Kim's Bridal Shoppe has 10,400 shares of common stock outstanding at a price of $38 per share. It also has 225 shares of preferred stock outstanding at a price of $89 per share. There are 540 bonds outstanding that have a coupon rate of 5.7 percent paid semiannually. The bonds mature in 19 years, have a face value of $1,000, and sell at 94 percent of par. What is the capital structure weight of the common stock

Answer 1

Answer:

42.83%

Explanation:

The computation of the weight of the common stock is shown below

= Common stock ÷ Total capital

= $395,200 ÷  $922,825

= 42.83%

Working note

For Common Stock

= 10,400 shares × $38  

= $395,200

For Preferred Stock

= 225 shares × $89

= $20,025

Bonds Outstanding

= 540 Bonds × $1,000 × 94% of par

= $507,600

Now the Total capital is

= $395,200 + $20,025 + $507,600

= $922,825