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Erna Corp. has 9 million shares of common stock outstanding. The current share price is $75, and the book value per share is $6. Erna
Erna Corp. has 9 million shares of common stock outstanding. The current share price is $75, and the book value per share is $6. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a coupon of 10 percent, and sells for 96 percent of par. The second issue has a face value of $65 million, has a coupon of 11 percent, and sells for 109 percent of par. The first issue matures in 25 years, the second in 9 years. a. What are Erna's capital structure weights on a book value basis? (Round your answer to 4 decimal places. (e.g., 32.1616)) Equity/Nalue Debt/Value b. What are Erna's capital structure weights on a market value basis? (Round your answer to 4 decimal places. (e.g., 32.1616)) Equity/Value Debt/Value c. Which are more relevant, the book or market value weights? O Market value Book value
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