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7 July, 02:44

OMG Inc. has 5 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 6,000 bonds. Suppose the common shares are selling for $16 per share, the preferred shares are selling for $25 per share, and the bonds are selling for 109 percent of par. What would be the weight used for equity in the computation of OMG's WACC?

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  1. 7 July, 06:14
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    The equity weight is 69.84%

    Explanation:

    Value: C + P + B

    Common Equity:

    5,000,000 shares x 16 = 80,000,000

    Preferred Equity:

    4,000,000 shares x 25 = 100,000,000

    Debt:

    6,000 x 1,000 x 109/100 = 6,540,000‬

    total value: 114,540,000

    Common Equity weight: Common Stock / Value

    80,000,000 / 114,540,000 = 0,6984459577440196 = 69.84%
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