Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 9 percent and sells for 95 percent of par. The second issue has a face value of $60 million and a coupon rate of 10 percent and sells for 108 percent of par. The first issue matures in 24 years, the second in 8 years. |
a. |
What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).) |
Equity/Value | |
Debt/Value |
b. |
What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations. 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? |
|
a
BV of equity=Price of equity*number of shares outstanding |
BV of equity=5*8000000 |
=40000000 |
BV of Bond1=Par value*bonds outstanding*%age of par |
BV of Bond1=1000*80000*1 |
=80000000 |
BV of Bond2=Par value*bonds outstanding*%age of par |
BV of Bond2=1000*60000*1 |
=60000000 |
BV of firm = BV of Equity + BV of Bond1+ BV of Bond 2 |
=40000000+80000000+60000000 |
=180000000 |
Weight of equity = BV of Equity/BV of firm |
Weight of equity = 40000000/180000000 |
W(E)=0.2222 |
Weight of debt = BV of Bond/BV of firm |
Weight of debt = 140000000/180000000 |
W(D)=0.7778 |
b
MV of equity=Price of equity*number of shares outstanding |
MV of equity=74*8000000 |
=592000000 |
MV of Bond1=Par value*bonds outstanding*%age of par |
MV of Bond1=1000*80000*0.95 |
=76000000 |
MV of Bond2=Par value*bonds outstanding*%age of par |
MV of Bond2=1000*60000*1.08 |
=64800000 |
MV of firm = MV of Equity + MV of Bond1+ MV of Bond 2 |
=592000000+76000000+64800000 |
=732800000 |
Weight of equity = MV of Equity/MV of firm |
Weight of equity = 592000000/732800000 |
W(E)=0.8079 |
Weight of debt = MV of Bond/MV of firm |
Weight of debt = 140800000/732800000 |
W(D)=0.1921 |
c
Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $74,...
Filer Manufacturing 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 $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...
Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $88, and the book value per share is $7. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value $80 million, has a coupon of 5 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, has a coupon of 6 percent, and sells for 106 percent of par. The first...
Filer Manufacturing has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value $60 million, a coupon of 5 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a coupon of 6 percent, and sells for 104 percent of par. The first issue matures...
Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $87, and the book value per share is $6. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $75 million and a 10 percent coupon and sells for 97 percent of par. The second issue has a face value of $50 million and a 11 percent coupon and sells for 105 percent of par. The first issue...
Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $6. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70 million and a 8 percent coupon and sells for 94 percent of par. The second issue has a face value of $40 million and a 9 percent coupon and sells for 107 percent of par. The first issue...
Q3: Filer Manufacturing has II million shares of common stock outstanding. The current share price is $63 and the book value per share is S6+ Filer Manufacturing also has two bond issues outstanding. The fi rst bond issue has a face value of $70 million, has a 7 percent coupon, and sells for 93 percent of par. The second issue has a face value of $55 million, has an 8 percent coupon, and sells for 104 percent of par. The...
Vedder, Inc., has 5 million shares of common stock outstanding. The current share price is $73, and the book value per share is $9. Vedder also has two bond issues outstanding. The first bond issue has a face value of $60 million, a coupon rate of 7 percent, and sells for 98 percent of par. The second issue has a face value of $40 million, a coupon rate of 6.5 percent, and sells for 97 percent of par. The first...
Bonaime, Inc., has 7.5 million shares of common stock outstanding. The current share price is $62.50, and the book value per share is $5.50. The company also has two bond issues outstanding. The first bond issue has a face value of $71.5 million, a coupon rate of 7 percent, and sells for 90.5 percent of par. The second issue has a face value of $36.5 million, a coupon rate of 8 percent, and sells for 89.5 percent of par. The...
Filer Manufacturing has 10.1 million shares of common stock outstanding. The current share price is $53, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $90 million, has a 6 percent coupon, and sells for 90 percent of par. The second issue has a face value of $58.58 million, has a 6 percent coupon, and sells for 94.2 percent of par. The first issue...
Bonaime, Inc., has 7.3 million shares of common stock outstanding. The current share price is $62.30, and the book value per share is $5.30. The company also has two bond issues outstanding. The first bond issue has a face value of $71.3 million, a coupon rate of 7.3 percent, and sells for 91.5 percent of par. The second issue has a face value of $36.3 million, a coupon rate of 7.8 percent, and sells for 90.5 percent of par. The...