ani Corporation has 7 million shares of common stock outstanding. The current share price is $73 e book value per share is $8. The company also has two bond issues outstanding. The first bond as a face value of $90 million, has a coupon rate of 6 percent, and sells for 98 percent of par. The econd issue has a face value of $75 million, has a coupon rate of 5 percent, and sells for 110 perce ar. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupo ayments.
ani Corporation has 7 million shares of common stock outstanding. The current share price is $73 e book value per share is $8. The company also has two bond issues outstanding. The first bond as a face value of $90 million, has a coupon rate of 6 percent, and sells for 98 percent of par. The econd issue has a face value of $75 million, has a coupon rate of 5 percent, and sells for 110 perce ar. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupo ayments.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Dani Corporation has 7 million shares of common stock outstanding. The current share price is $73, and
the book value per share is $8. The company also has two bond issues outstanding. The first bond issue
has a face value of $90 million, has a coupon rate of 6 percent, and sells for 98 percent of par. The
second issue has a face value of $75 million, has a coupon rate of 5 percent, and sells for 110 percent of
par. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupon
payments.
a. What are the company's capital structure weights on a book value basis?
Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g.,
.1616.
b. What are the company's capital structure weights on a market value basis?
Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g.,
.1616.
c. Which are more relevant, the book or market value weights?
a. Equity/Value
Debt/Value
b. Equity/Value
Debt/Value
c. More relevant
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