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
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