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team sports has 4.7 million shares of common stock outstanding, 2.7 million shares of preferred stock outstanding, and 27 thousand bonds. if the common shares are selling for $3.70 per share, the preferred share are selling for $15.7 per share, and the bonds are selling for 98.93 percent of par, what would be the weight used for common stock in the computation of team's wacc? multiple choice 25.17% 63.28% 25.17% 33.33% 20.11%

Respuesta :

Tundexi

The weight that will be used for common stock in the computation of team's WACC is 20%. The Option E is correct.

How do we calculate the The weight that will be used for common stock?

First, we will calculate the value of the company's total capital:

= Common stock + Preferred stock + Debt

= (4,700,000 * 3.70) + (2,700,000 * 15.7) + (27,000 * 96.93/100 * 1,000 par value)

= 17390000 + 42390000 + 26,171,100

= $85,951,100

The weight to be used for common stock is:

= Common stock value / Total capital value

= (4,700,000 * 3.70) / $85,951,100

= $17,390,000 / $85,951,100

= 0.202324345

= 20%

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