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11 June, 01:46

FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $25 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 97 percent of par. What would be the weight used for equity in the computation of FarCry's WACC? (Round your answer to 2 decimal places.)

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  1. 11 June, 04:20
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    72.93%

    Explanation:

    The computation of weight used for equity is shown below:-

    Value of common stock = common stock outstanding * sold common share

    = 5,000,000 * $25

    = $125,000,000

    Value of preferred stock = preferred stock outstanding * sold preferred shares

    2,000,000 * $13.50

    = $27,000,000

    So, Value of bonds = 20,000 * $1,000 * 0.97

    = $19,400,000

    Total = $125,000,000 + $27,000,000 + $19,400,000

    = $171,400,000

    Now, Weight of Equity = $125,000,000 : $171,400,000

    = 72.93%
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