Question

Ten Pins Manufacturing has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million and a coupon rate of 7 percent and sells for 94 percent of par. The second issue has a face value of $35 million and a coupon rate of 8 percent and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 years.

a. What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations and 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 and 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