Answer:
The proportion of common stock = 45%
Explanation:
WACC represents the average expense associated with a company's long-term financing options. Each financing source is assigned a weight based on its market value as a fraction of the overall market value of the funds available.
To determine the weight of common stock, we will proceed with the following steps
below:
Step 1
Compute the total market value of all funding sources
Market value of common stock
Bonds = $990 × 1,200 = $1,188,000
Preferred Stock = $28 × 2,500 = $70,000
Common stock = $37 × 28,000 = $1,036,000
Total market value = 1,188,000 + 70,000 + 1,036,000
= $2,294,000.00
Step 2
Determine the weight of common stock
The weight of common stock = ($1,036,000 / $2,294,000.00) × 100
= 45%
The proportion of common stock = 45%
