Question

BetterPie Industries has 3 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 10,000 bonds. Assume the common shares are selling for $45 per share, the preferred shares are selling for $22.50 per share, and the bonds are selling for 98 percent of par.

What would be the weights used in the calculation of BetterPie’s WACC? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Equity weight	70.54
Preferred stock weight	?
Debt weight	?

Answer 1

Answer:

Equity weight	71.13 %
Preferred stock weight	23.17%
Debt weight	5.16%

Note:

Value of Equity= 3 Million Shares *$ 45

Value of Preferred Stock = 2 Million Shares * $ 22.50

Value of debt = 10,000 bonds *$ 1,000 * 98%

		Weight ( Value / Total Value*100)
Debt	135000000	71.13
Preferred Stock	45000000	23.71
Debt	9800000	5.16
Total Value	189800000