es Dani Corporation has 6 million shares of common stock outstanding. The current share price is $78, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 7 percent, and sells for 98 percent of par. The second issue has a face value of $35 million, a coupon rate of 8 percent, and sells for 106 percent of par. The first issue matures in 22 years, the second in 5 years. 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
es Dani Corporation has 6 million shares of common stock outstanding. The current share price is $78, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 7 percent, and sells for 98 percent of par. The second issue has a face value of $35 million, a coupon rate of 8 percent, and sells for 106 percent of par. The first issue matures in 22 years, the second in 5 years. 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
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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Transcribed Image Text:es
Dani Corporation has 6 million shares of common stock outstanding. The current share price is $78, and the book value per share is
$5. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 7
percent, and sells for 98 percent of par. The second issue has a face value of $35 million, a coupon rate of 8 percent, and sells for 106
percent of par. The first issue matures in 22 years, the second in 5 years.
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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