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Dan Corporation has 4 million shares of common stock outstanding. The current share price is $70 and the book value per share is $5. The
Dan Corporation 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, both with semiannual coupons. 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 in 20 years, the second in 4 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant? Market value weights Book value weights
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