Question
Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $68, and the book value per share is $8. The
Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $68, 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 $70 million, a coupon rate of 6 percent, and sells for 97 percent of par. The second issue has a face value of $40 million, a coupon rate of 6.5 percent, and sells for 108 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual payments. |
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., .3216.) |
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., .3216.) |
c. | Which are more relevant, the book or market value weights? |
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