Suppose Westerfield Co. has the following financial information: Debt: 900,000 bonds outstanding with a face value of $1,000.  The bonds currently trade at 85% of par and have 12 years to maturity.  The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock:  25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk-free rate is 5%, and the tax rate is 21%. Calculate the weight of the common stock in the capital structure. (Enter percentages as decimals and round to 4 decimals)

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles
Section: Chapter Questions
Problem 1P: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually...
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Suppose Westerfield Co. has the following financial information:

Debt: 900,000 bonds outstanding with a face value of $1,000.  The bonds currently trade at 85% of par and have 12 years to maturity.  The coupon rate equals 7%, and the bonds make semiannual interest payments.

Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually.

Common stock:  25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22.

Market and firm information: The expected return on the market is 9%, the risk-free rate is 5%, and the tax rate is 21%.

Calculate the weight of the common stock in the capital structure. (Enter percentages as decimals and round to 4 decimals)

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