Old Fort, Inc., has 10 million shares of common stock outstanding. The current share price is $53,

Question:

Old Fort, Inc., has 10 million shares of common stock outstanding. The current share price is $53, and the book value per share is $1. Old Fort also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a 7.5 percent coupon, and sells for 97 percent of par. The second issue has a face value of $40 million, has a 7 percent coupon, and sells for 96 percent of par. The first issue matures in 20 years, the second in 12 years.

(a) What are the company’s capital structure weights on a book value basis?

(b) What are the company’s capital structure weights on a market value basis?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...