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24 October, 21:25

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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  1. 24 October, 22:42
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    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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