The weight of the common stock as it relates to the firm's weighted average cost of capital is 35%.
The weighted average cost of capital computes a firm's cost of capital based on the firm's average cost of capital from all sources: common stock, preferred stock, bonds, and other forms of debt.
The weight of the common stock can be determined by dividing the common stock market value by the total capitalization from all sources.
Outstanding:
Bonds payable = $1,590,000 (1,500 x $1,060)
Preferred stock = $160,000 (5,000 x $32)
Common stock = $936,000 (36,000 x $26)
Total debts and equity = $2,686,000
Weight of common stock = 35% ($936,000/$2,686,000 x 100)
Thus, the weight of the common stock as it relates to the firm's weighted average cost of capital is 35%.
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