Problem:
OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $27 per share, the preferred shares are selling for $26 per share, and the bonds are selling for 108 percent of par.
Required:
Question: What weight should you use for debt in the computation of OMG's WACC?
Note: Provide support for your underlying principle.