Question

Here I Sit Sofas has 8,000 shares of common stock outstanding at a price of $103...

Here I Sit Sofas has 8,000 shares of common stock outstanding at a price of $103 per share. There are 960 bonds that mature in 39 years with a coupon rate of 7.7 percent paid semiannually. The bonds have a par value of $2,000 each and sell at 113 percent of par. The company also has 6,900 shares of preferred stock outstanding at a price of $56 per share. What is the capital structure weight of the debt?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Debt:

Number of bonds outstanding = 960
Face Value = $2,000

Current Price = 113% * $2,000
Current Price = $2,260

Market Value of Debt = 960 * $2,260
Market Value of Debt = $2,169,600

Preferred Stock:

Number of shares outstanding = 6,900
Current Price = $56

Market Value of Preferred Stock = 6,900 * $56
Market Value of Preferred Stock = $386,400

Common Stock:

Number of shares outstanding = 8,000
Current Price = $103

Market Value of Common Stock = 8,000 * $103
Market Value of Common Stock = $824,000

Market Value of Firm = Market Value of Debt + Market Value of Preferred Stock + Market Value of Common Stock
Market Value of Firm = $2,169,600 + $386,400 + $824,000
Market Value of Firm = $3,380,000

Weight of Debt = $2,169,600 / $3,380,000
Weight of Debt = 0.6419

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Here I Sit Sofas has 7,000 shares of common stock outstanding at a price of $93...
Here I Sit Sofas has 7,000 shares of common stock outstanding at a price of $93 per share. There are 560 bonds that mature in 29 years with a coupon rate of 6.7 percent paid semiannually. The bonds have a par value of $2,000 each and sell at 108 percent of par. The company also has 5,900 shares of preferred stock outstanding at a price of $46 per share. What is the capital structure weight of the debt?
Kim's Bridal Shoppe has 11,400 shares of common stock outstanding at a price of $48 per...
Kim's Bridal Shoppe has 11,400 shares of common stock outstanding at a price of $48 per share. It also has 275 shares of preferred stock outstanding at a price of $90 per share. There are 300 bonds outstanding that have a coupon rate of 6.7 percent paid semiannually. The bonds mature in 29 years, have a face value of $2,000, and sell at 108 percent of par. What is the capital structure weight of the common stock?
Kim's Bridal Shoppe has 12,200 shares of common stock outstanding at a price of $56 a...
Kim's Bridal Shoppe has 12,200 shares of common stock outstanding at a price of $56 a share. It also has 315 shares of preferred stock outstanding at a price of $90 a share. There are 380 bonds outstanding that have a 7.5 percent semiannual coupon. The bonds mature in six years, have a face value of $2,000, and sell at 112 percent of par. What is the capital structure weight of the common stock?
Western Electric has 23,000 shares of common stock outstanding at a price per share of $57...
Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49...
) Hankins Corporation has 8 million shares of common stock outstanding, 920,000 shares of preferred stock...
) Hankins Corporation has 8 million shares of common stock outstanding, 920,000 shares of preferred stock outstanding, and 180,000 of 5.5 percent semiannual bonds outstanding, par value $1,000 each. The annual dividend for the preferred stocks is $4.8 per share. The common stock currently sells for $39 per share and has a beta of 1.26, the preferred stock currently sells for $80 per share, and the bonds have 25 years to maturity and sell for 98 percent of par. The...
Western Electric has 25,000 shares of common stock outstanding at a price per share of $65...
Western Electric has 25,000 shares of common stock outstanding at a price per share of $65 and a rate of return of 13.70 percent. The firm has 6,600 shares of 6.40 percent preferred stock outstanding at a price of $88.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $362,000 and currently sells for 104 percent of face. The yield to maturity on the debt is 7.66 percent. What...
Question 7 1 pts ABC, Inc., has 817 shares of common stock outstanding at a price...
Question 7 1 pts ABC, Inc., has 817 shares of common stock outstanding at a price of $50 a share. They also have 211 shares of preferred stock outstanding at a price of $80 a share. There are 690, 8 percent bonds outstanding that are priced at $40. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferred stock? Enter your answer as a percentage rounded off to two decimal points....
Titan Mining Corporation has 7.8 million shares of common stock outstanding, 290,000 shares of 4.3 percent...
Titan Mining Corporation has 7.8 million shares of common stock outstanding, 290,000 shares of 4.3 percent preferred stock outstanding, and 175,000 bonds with a semiannual coupon rate of 5.9 percent outstanding, par value $2,000 each. The common stock currently sells for $59 per share and has a beta of 1.05, the preferred stock has a par value of $100 and currently sells for $97 per share, and the bonds have 16 years to maturity and sell for 103 percent of...
Saint Nick Enterprises has 18,100 shares of common stock outstanding at a price of $72 per...
Saint Nick Enterprises has 18,100 shares of common stock outstanding at a price of $72 per share. The company has two bond issues outstanding. The first issue has 10 years to maturity, a par value of $2,000 per bond, and sells for 103 percent of par. The second issue matures in 24 years, has a par value of $1,000 per bond, and sells for 108 percent of par. The total face value of the first issue is $280,000, while the...
Charlotte's Crochet Shoppe has 12,200 shares of common stock outstanding at a price per share of...
Charlotte's Crochet Shoppe has 12,200 shares of common stock outstanding at a price per share of $68 and a rate of return of 11.33 percent. The company also has 370 bonds outstanding, with a par value of $1,000 per bond. The pretax cost of debt is 5.99 percent and the bonds sell for 95.1 percent of par. What is the firm's WACC if the tax rate is 39 percent?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT