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Kim's Bridal Shoppe has 11,500 shares of common stock outstanding at a price of $49 per share. It also has 280 shares of preferred stock outstanding at a price of $91 per share. There are 310 bonds outstanding that have a coupon rate of 6.8 percent paid semiannually. The bonds mature in 30 years, have a face value of $2,000, and sell at 108.5 percent of par. What is the capital structure weight of the common stock

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beritop1089

Answer:

44.66%

Explanation:

First, find the market values of each source of capital;

Market value of Common stock = 11500 *$49 = $563,500

Market value of Preferred stock = 280 *$91 = $25,480

Market value of bonds = 310 * (1.085 *$2000) = $672,700

Next, find the total market value;

=$563,500 + $25,480 + $672,700

= $1,261,680

Weight of common stock = $563,500/$1,261,680 = 0.4466 or 44.66%

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