Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 6 percent, and sells for 96 percent of par. The second issue has a face value of $45 million, a coupon of 7 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 5 years. (a) What are the company's capital structure weights on a book value basis? (b) What are the companyâs capital structure weights on a market value basis? (c) Which are more relevant, the book or market value weights?
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 6 percent, and sells for 96 percent of par. The second issue has a face value of $45 million, a coupon of 7 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 5 years. (a) What are the company's capital structure weights on a book value basis? (b) What are the companyâs capital structure weights on a market value basis? (c) Which are more relevant, the book or market value weights?
Related questions
| Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, a coupon of 10 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon of 11 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 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 companyâs 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? | ||||
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