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What is the weight of preferred stock

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Reference no: EM132815910

Question - Capital Structure Weights

Q1. If the market value of debt is $100,000, market value of preferred stock is $300,000, and market value of common equity is $500,000, what is the weight of debt? What is the weight of preferred stock? What is the weight of common equity?

Q2. ABC, Inc., has 1,000 shares of common stock outstanding at a price of $150 a share. They also have 250 shares of preferred stock outstanding at a price of $225 a share. There are 1000, 8 percent bonds outstanding that are priced at $960. What is the capital structure weight of common stock? What is the weight of preferred stock? What is the weight of debt?

Q3. Continuation of Problem #2: suppose the before-tax cost of debt is 7%, cost of preferred stock is 10%, the cost of common equity is 15%, and the tax rate is 30%, what is the WACC?

Reference no: EM132815910

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