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Estimating Weights for the Capital Structure

Estimating Weights (Continued). Suppose the stock price is $50, there are 3 million shares of stock, the firm has $25 million of preferred stock, and $75 million of debt.. (More...). Vce = $50 (3 million) = $150 million.Vps = $25 million.Vd = $75 million.Total value = $150 $25 $75 = $250 mil

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Estimating Weights for the Capital Structure

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    1. Estimating Weights for the Capital Structure If you don’t know the targets, it is better to estimate the weights using current market values than current book values. If you don’t know the market value of debt, then it is usually reasonable to use the book values of debt, especially if the debt is short-term.

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