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Hero Manufacturing has 9 million shares of common stock outstanding. The current share price is $81 and the book value per share is $8. The
Hero Manufacturing has 9 million shares of common stock outstanding. The current share price is $81 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 $80 million and a coupon of 10 percent and sells for 96 percent of par. The second issue has a face value of $50 million and a coupon of 11 percent and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 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 declmal places, e.g., 1616.) a. Equity/Value Debt/Value b. Equity/Value Debt/Value c. Which are more relevant? Market value weights Book value weights
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