Question
Crati, Inc., has 7 million shares of common stock outstanding. the current share price is $83, and the book value per share is $8. The
Crati, Inc., has 7 million shares of common stock outstanding. the current share price is $83, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $140 million, has a coupon rate of 6%, and sells for 94% of par. The second issue has a face value of $125 million, has a coupon rate of 5%, and sells for 105% of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments.
a. What are the company's capital structure weights on a book value basis? (Round answers to 4 decimal places, e.g., 0.2356)
b. What are the company's capital structure weights on a market value basis? (Round your answers to 4 decimal Places, e.g., 0.4536)
c. Which are more relevant, the book or market value weights?
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