Question

Erna Corp. has 8 million shares of common stock outstanding. The current share price is $73, and the book value per share is $7. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a 7 percent coupon, and sells for 97 percent of par. The second issue has a face value of $50 million, has an 8 percent coupon, and sells for 108 percent of par. The first issue matures in 21 years, the second in 6 years.

a.	What are Erna’s capital structure weights on a book value basis? (Round your answers to 4 decimal places. (e.g., 32.1616))

Equity/Value
Debt/Value

b.	What are Erna’s capital structure weights on a market value basis? (Round your answers to 4 decimal places. (e.g., 32.1616))

Equity/Value
Debt/Value

Answer 1