Edgehill, Inc has 300,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 7 percent paid semi-annually, and 13 years to maturity. The current YTM on the bonds is 5.6 percent. The company also has 10 million shares of stock outstanding, with a market price of $75 per share.

1. What is the companys market value debt-equity ratio? (5)

2. Which is more relevant, the debt-equity ratio based on book values or market values? Why? (3)