Question
Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. The
Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, 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 $90 million, a coupon rate of 6 percent, and sells for 98 percent of par. The second issue has a face value of $75 million, a coupon rate of 5 percent, and sells for 110 percent of par. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupon payments.
a.What are the company's capital structure weights on a book value basis?
b. What are the companys capital structure weights on a market value basis?
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