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The General's CFO is in the process of determining the firm's WACC and needs to figure out the weights of the various types of capital
The General's CFO is in the process of determining the firm's WACC and needs to figure out the weights of the various types of capital sources. Accordingly, he starts by collecting information from the balance sheet and the capital markets, and makes up the Table shown below: Component Balance Sheet Value Number outstanding Current Market Price Market Value Debt $3,000,000 3,250 $1,075 $3,493,750 Preferred stock $500,000 7,500 $70 $525,000 Common stock $7,000,000 750,000 $14.00 $10,500,000 Which of the following statements is correct? The weight of the debt that should be used is 28.57%. The weight for common stock is 66.67%. All of the answers are correct. The weight for preferred stock is 3.62%
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