Respuesta :
Answer:
39.45%
Explanation:
For the computation of capital structure weight of the common stock first we need to follow some steps which is shown below:-
Step 1
The Market value of common stock = Shares of common stock × Price of common stock
= 100,000 × $37
= $3,700,000
Step 2
The Market value of preferred stock = Shares of preferred stock × price of preferred stock
= 6000 × $30
= $180,000
Step 3
The Market value of bonds = No. of bonds × par value × Selling rate
= 5,000 × $1,000 × 110%
= $5,500,000
Step 4
Total capital = $3,700,000 + $180,000 + $5,500,000
= $9,380,000
and finally
Capital structure weight of common stock = market value of common stock ÷ total capital
= $3,700,000 ÷ $9,380,000
= 0.3945
or
= 39.45%
The capital structure weight of the common stock for Empire Plumbing Supply is 39.45%.
Here, we are to calculate the capital structure weight of the common stock.
Market value of common stock = Shares of common stock * Price of common stock
Market value of common stock = 100,000 shares * $37
Market value of common stock = $3,700,000
Market value of preferred stock = Shares of preferred stock * price of preferred stock
Market value of preferred stock = 6000 * $30
Market value of preferred stock = $180,000
Market value of bonds = Number of bonds * Par value * Selling rate
Market value of bonds = 5,000 * $1,000 * 110%
Market value of bonds = $5,500,000
Total capital = Market value of common stock + Market value of preferred stock + Market value of bonds
Total capital = $3,700,000 + $180,000 + $5,500,000
Total capital = $9,380,000
Capital structure weight of common stock = Market value of common stock / Total capital
Capital structure weight of common stock = $3,700,000 / $9,380,000
Capital structure weight of common stock = 0.3945
Capital structure weight of common stock = 39.45%
Therefore, the capital structure weight of the common stock for Empire Plumbing Supply is 39.45%.
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