Paper Exchange has 80 million shares of common stock outstanding,

Paper Exchange has 80 million shares of common stock outstanding, 60 million shares of preferred stock outstanding, and 50 thousand bonds. If the common shares are selling for $20 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 105 percent of par, what would be the weight used for preferred stock in the computation of Paper’s WACC?

(60,000,000 × 10)/(80,000,000 × 20 + 60,000,000 × 10 + 50,000 × 1.05 × 1,000) = 600m./2252.5m. = 26.64 percent.

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