2. Balance sheet data Bonds (8% due 2037) Preferred stock (2 million shares at $5 par value) Common stock (4 million shares at $7 Additional paid-in capital Retained earnings Total liabilities and equity par value) $122.0 million $ 10.0 million 28.0 million 30.0 million 130.0 million $320.0 million Market price for bonds Market price for common stock Market price for preferred stock $1,200 $ 135 $ 8 = Management has announced that it wishes to move toward a capital structure composed of 30% debt and 70% equity, with 10% of the equity as preferred stock. Given this: a. Calculate the financing weights in book value terms. b. Calculate the financing weights in market value terms. c. What are the target financing weights? d. Which set of weights should the firm select? e. What will probably happen to the financial risk of the firm if it decides to adopt the weighting scheme in part c? 2. Balance sheet data Bonds (8% due 2037) Preferred stock (2 million shares at $5 par value) Common stock (4 million shares at $7 Additional paid-in capital Retained earnings Total liabilities and equity par value) $122.0 million $ 10.0 million 28.0 million 30.0 million 130.0 million $320.0 million Market price for bonds Market price for common stock Market price for preferred stock $1,200 $ 135 $ 8 = Management has announced that it wishes to move toward a capital structure composed of 30% debt and 70% equity, with 10% of the equity as preferred stock. Given this: a. Calculate the financing weights in book value terms. b. Calculate the financing weights in market value terms. c. What are the target financing weights? d. Which set of weights should the firm select? e. What will probably happen to the financial risk of the firm if it decides to adopt the weighting scheme in part c