Problem:

Vandelay Industries has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8% bonds outstanding that are priced at 99% of face value. The bonds mature in 16 years and pay interest semiannually.

Required:

Question: What is the capital structure weight of the preferred stock?

a. 13.67%

b. 9.98%

c. 7.68%

d. 17.77%

e. 8.26%

Note: Show supporting computations in good form.