Question
Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $85 and the book value per share is $8. The
Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $85 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 $65 million and a coupon of 8 percent and sells for 95 percent of par. The second issue has a face value of $40 million and a coupon of 9 percent and sells for 108 percent of par. The first issue matures in 23 years, the second in 5 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.)
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