(Weighted average cost of capitalweights) A company has the following right-hand side of its balance sheet: Bonds payable = $250,000

Preferred stock (1000 shares) = $100,000

Common stock (200,000 shares) = $400,000

--------------------------------------------------------------

Total Liabilities + Equity = $750,000 Bonds payable are currently priced at 115 (115% of face value) in the market, preferred stock is selling at $70 per share, and common stock is selling at $20 per share. Management has announced that it is targeting a capital structure composed of 65% debt and 35% equity. Of the equity, 10% is to be preferred stock, with the remainder common stock. Calculate the weights to be used in the weighted average cost of capital calculation if the weights are based on:

a. The companys book values

b. The companys market values

c. Managements target capital structure

d. If managements target weights were not known, which of the other two weighting schemes would you use? Why?