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The common stock of​ Moe's Restaurant is currently selling for ​$76 per​ share, has a book...

The common stock of​ Moe's Restaurant is currently selling for ​$76 per​ share, has a book value of ​$58 per​ share, and there are 1.13 million shares of common stock outstanding. In​ addition, the firm also has 104,000 bonds outstanding with a par value of ​$1,000 that are selling at 107 percent of par. What are the capital structure weights that​ Moe's should use to analyze its capital​ structure? The weight of the debt in the capital structure is ____​%. ​(Round to two decimal​ places.)

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Answer #1

Market Value of Shares = $76 * 1,130,000

= $85,880,000

Market Value of Bonds = $1000 * 104,000 * 107%

= $111,280,000

Weight of Debt = Cost of Debt / Total Cost

  = 111,280,000 / (85,880,000+111,280,000)

= 111,280,000 / 197,160,000

Weight of Debt = 56.44%

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