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Home Depot Inc has 750 bonds outstanding that are selling for $980 each, 2,500 shares of...

Home Depot Inc has 750 bonds outstanding that are selling for $980 each, 2,500 shares of preferred stock with a market price of $50 a share, and 30,000 shares of common stock valued at $55 a share. What weight should be assigned to the common stock when computing the firm's weighted average cost of capital?

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Ans 65.74%

Stock No of shares/bonds (a) Price (b) INVESTMENT (i) = a * b
BONDS 750 980                              7,35,000
PREFERRED STOCK 2500 50                              1,25,000
COMMON STOCK 30000 55                            16,50,000
Total                            25,10,000
Weight of Common Stock = Investment in Common Stock / Total Investment
= 1650000 / 2510000 * 100
65.74%

jeff jeffy answered 7 months ago
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