Question
Dani Corporation has 4 million shares of common stock outstanding. The current share price is $83 and the book value per share is $8. The
Dani Corporation has 4 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, both with semiannual coupons. The first bond issue has a face value $90 million, a coupon of 6 percent, and sells for 98 percent of par. The second issue has a face value of $60 million, a coupon of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 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.) |
Equity/Value= Debt/Value= Equity/Value= Debt/Value= |
c. | Which are more relevant? |
multiple choice
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Market value weights
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Book value weights
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