far cry industries a maker of telecommunications equipment has 3 shares of common stock outstanding 1...

far cry industries a maker of telecommunications equipment has 3 shares of common stock outstanding 1 million shares of preferred stock outstanding and 10000 bonds suppose the common shares sell for 29 per share, the proffered shares sell for 15.50 per share and the bonds sell for 98 percent of par.

what weight should you use for preferred stock in the computation of far crys wacc?
weight used_____?

Expert Solution

In the present situation, market value are taken for consideration as follows.

securities	number of share outstanding	market value per share	product	Weight (WACC)
common stock	3,000,000	$ 29.00	$ 87,000,000	0.848699344
preferred stock	1,000,000	$ 15.50	$ 15,500,000	0.151205056
bonds	10,000	$ 0.98	$ 9,800	0.01234587
			$ 102,509,800

WACC used for preferred stock is in bold text which is 0.1512 or 15.12%.

jeff jeffy answered 1 year ago

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