question archive Bill's Boards (BB) has 20 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 20 thousand bonds
Bill's Boards (BB) has 20 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 20 thousand bonds
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Bill's Boards (BB) has 20 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 20 thousand bonds. If the common shares are selling for $30 per share the preferred shares are selling for $17 per share, and the bonds are selling for 99% of par (par value is $ 1,000), what would be the weight used for debt in the computation of BB's WACC? 0.83% 2.88% 3.33% 2.79%
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Market value of equity = 20 x 30 = 600 million
Market value of preferred stock = 4 x 17 = 68 million
Market value of debt = 20000 x 99% x 1000 = 19800000 = 19.8 million
Total market value = Market value of equity, debt and preferred stock = 600 + 68 +19.8 = 687.8
Weight of debt = Market value of debt / Total market value = 19.8 / 687.8 = 2.88%
Answer : 2.88%
