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Kim's Bridal Shoppe has 12,000 shares of common stock outstanding at a price of $14 a share
Kim's Bridal Shoppe has 12,000 shares of common stock outstanding at a price of $14 a share. It also has 5,000 shares of preferred stock outstanding at a price of $31 a share. There are 65 bonds outstanding that have a 6 percent semiannual coupon. The bonds mature in 9 years, have a face value of $1,000, and sell at 93 percent of par. What is the capital structure weight of the common stock?
Weight of common stock =
Expert Solution
Total value of:
Common stock=(12000*14)=$168000
Preferred stock=(5000*31)=$155000
Bonds=65*(1000*93%)=$60450
Total value=168000+155000+60450
=$383450
Hence weight of common stock=168000/383450
=0.4381 (or 43.81% approx)
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