Solar Shades has 8 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 10 thousand bonds. If the common shares are selling for $13 per share, the preferred shares are selling for $30 per share, and the bonds are selling for 105 percent of par, what would be the weight used for common stock in the computation of Solar Shades' WACC?

Question

Quizplus · Accepted Answer

To calculate the weight of common stock in the WACC, we first need to find the market value of each component (common stock, preferred stock, and bonds). - Common stock market value = 8 million shares * $13/share = $104 million- Preferred stock market value = 4 million shares * $30/share = $120 million- Bonds market value = 10,000 bonds * 1000 (assuming par value is $1000 per bond) * 105% = $10.5 millionTotal market value = $104 million + $120 million + $10.5 million = $234.5 millionWeight of common stock = $104 million / $234.5 million = 0.4435 or 44.35%

Solar Shades Has 8 Million Shares of Common Stock Outstanding