Question

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?

Answer 1

Component	Market Value	Capital Structure Weight
Common stock [7000*93]	$             651,000	30.53%
Debt [Bonds = 560*2000*108%]	$          1,209,600	56.74%
Preferred stock [5900*46]	$             271,400	12.73%
Total	$          2,132,000	100.00%
ANSWER:
Capital structure weight of debt =	56.74%