Question

Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $86, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 9 percent and sells for 96 percent of par. The second issue has a face value of $45 million and a coupon rate of 10 percent and sells for 104 percent of par. The first issue matures in 24 years, the second in 6 years.

a.	What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

Equity/Value
Debt/Value

b.	What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

Equity/Value
Debt/Value

c.

Which are more relevant, the book or market value weights?

	Market value
	Book value

Answer 1