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

Finance Dec 28, 2020

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 %

Expert Solution

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)

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