Problem 14-12 Book Value versus Market Value [LO3] Dani Corporation has 6 million shares of common stock outstanding. The current share price is $66, 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 $55 million, a coupon rate of 6 percent, and sells for 91 percent of par. The second issue has a face value of $40 million, a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual coupon payments. 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., .1616.) 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., .1616.)
Problem 14-12 Book Value versus Market Value [LO3] Dani Corporation has 6 million shares of common stock outstanding. The current share price is $66, 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 $55 million, a coupon rate of 6 percent, and sells for 91 percent of par. The second issue has a face value of $40 million, a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual coupon payments. 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., .1616.) 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., .1616.)
Chapter16: Financial Planning And Control
Section: Chapter Questions
Problem 13PROB
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![Problem 14-12 Book Value versus Market Value [LO3]
Dani Corporation has 6 million shares of common stock outstanding. The current share
price is $66, 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 $55 million, a coupon rate of 6
percent, and sells for 91 percent of par. The second issue has a face value of $40 million,
a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21
years, the second in 6 years. Both bonds make semiannual coupon payments.
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.,
.1616.)
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.,
.1616.)
a. Equity/Value
a. Debt/Value
b. Equity/Value
b. Debt/Value
c. Which are more relevant, the book or market value weights?
O Market value
Book value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7bc5b65-c699-419e-9c04-cb2dc6d9c6ea%2Fce6a2649-92dc-4da8-ab5f-203832cc9667%2Fi3sjj5n_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 14-12 Book Value versus Market Value [LO3]
Dani Corporation has 6 million shares of common stock outstanding. The current share
price is $66, 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 $55 million, a coupon rate of 6
percent, and sells for 91 percent of par. The second issue has a face value of $40 million,
a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21
years, the second in 6 years. Both bonds make semiannual coupon payments.
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.,
.1616.)
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.,
.1616.)
a. Equity/Value
a. Debt/Value
b. Equity/Value
b. Debt/Value
c. Which are more relevant, the book or market value weights?
O Market value
Book value
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