Dinklage Corp. has 8.1 million shares of common stock outstanding. The current share price is $47, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $54.27 million, has a 7 percent coupon, and sells for 98 percent of par. The first issue matures in 11 years, the second in 6 years.
Book value of Equity = Shares Outstanding * Book value per share
= 8,100,000 * $5
Book value of first bond issue = $70,000,000
Book value of second bond issue = $54,270,000
Total Book Value = Book value of Equity + Book value of first bond issue + Book value of second bond issue
= $40,500,000 + $70,000,000 + $54,270,000
Weight of Equity = Book value of Equity / Total Book Value
= $40,500,000 / $164,770,000
Wight of Debt = (Book value of First and second bonds issue) / Total Book value
= ($70,000,000 + $54,270,000) / $164,770,000
= $124,270,000 / $164,770,000
Weight of Equity on book value based capital structure is 24.58%
Weight of Debt on book value based capital structure is 75.42%
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