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Dani Corporation has 5 million shares of common stock outstanding. The current share price is $77, 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 $110 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $95 million, has a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 9 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 roun 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 roun 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

Dani Corporation has 5 million shares of common stock outstanding. The current share price is $77, 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 $110 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $95 million, has a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 9 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 roun 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 roun 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

Essentials Of Investments
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
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Dani Corporation has 5 million shares of common stock outstanding. The current share price is $77, 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 $110 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $95 million, has a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 9 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
Transcribed Image Text:Dani Corporation has 5 million shares of common stock outstanding. The current share price is $77, 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 $110 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $95 million, has a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 9 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
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