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Homework answers / question archive / FarCry Industries a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds
FarCry Industries a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares are selling for $24 per share, the preferred shares are selling for $13.00 per share, and the bonds are selling for 97 percent of par. What weight should you use for debt in the computation of FarCry's WACC? (Round your answer to 2 decimal places.) Weight used %
Total value of:
Common stock=(2*24)=$48 million
Preferred stock=(1*13)=$13 million
Bonds=10,000*(1000*97%)=$9.7 million
Total value=(48+13+9.7)
=$70.7 million
Hence weight of debt=9.7/70.7
=13.72%(Approx)
