In: Finance
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?
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% | |||