Problem:
The Auto Group has 1,000 bonds outstanding that are selling for $850 each. The company also has 8,400 shares of preferred stock at a market price of $70 each. The common stock is priced at $65 a share and there are 30,000 shares outstanding.
Required:
Question: What is the weight of the preferred stock as it relates to the firm's weighted average cost of capital?
Note: Be sure to show how you arrived at your answer.