Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock...

Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock outstanding, and 2.8 million bonds. If the common shares are selling for $26.8 per share, the preferred share are selling for $14.3 per share, and the bonds are selling for 96.82 percent of par, what would be the weight used for equity in the computation of Sports's WACC?

Expert Solution

Weight of Equity 0.10

Working:

Step-1:Calculation of market value of component of Capital


	Component of capital		Quantity	Market Price	Total Market Value
			(in million)	per quantity	(in million)

	Shares of common stock		11.8	$ 26.80	$ 316.24
	Shares of preferred stock		6.8	$ 14.30	$ 97.24
	Bonds		2.8	$ 968.20	$ 2,710.96

	Total				$ 3,124.44

Step-2:Calculation of weight of Equity

	Weight of Equity	=	Value of Equity/Total Value of capital
		=	$ 316.24	/	$ 3,124.44
		=	0.10

ekkarill92 answered 1 year ago

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