FarCry Industries, a maker of telecommunications equipment, has 6 million shares
ID: 2763328 • Letter: F
Question
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares sell for $29 per share, the preferred shares sell for $15.50 per share, and the bonds sell for 99 percent of par.
What weight should you use for preferred stock in the computation of FarCry’s WACC?
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares sell for $29 per share, the preferred shares sell for $15.50 per share, and the bonds sell for 99 percent of par.
Explanation / Answer
Weight we should use for preferred stock is .2210 Capital Structure weights on a market value basis Particulars Number Market Value Face Value Weights Common Stock 6,000,000.00 29.00 174,000,000.00 0.6202 Preferred Stock 4,000,000.00 15.50 62,000,000.00 0.2210 Bonds 45,000.00 990.00 44,550,000.00 0.1588 280,550,000.00 1.00