A firm has 100,000 shares of common stock and 40,000 shares of preferred stock outstanding. The common stock has a market value of $15 a share and the preferred stock is priced at $21 a share. The firm also has 1,000 bonds outstanding with a market price of $989 and a 5% coupon rate. The bonds mature in fifteen years and pay interest semi-annually. The weights for the common stock, the preferred stock, and the debt are _____________, respectively.

Question

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The market value of the common stock is $15 * 100,000 = $1,500,000. The market value of the preferred stock is $21 * 40,000 = $840,000. The market value of the bonds is $989 * 1,000 = $989,000. The total market value of the firm is $1,500,000 + $840,000 + $989,000 = $3,329,000. The weights for the common stock, the preferred stock, and the debt are $1,500,000/$3,329,000 = 45%, $840,000/$3,329,000 = 25%, and $989,000/$3,329,000 = 30%, respectively.

A Firm Has 100,000 Shares of Common Stock and 40,000