Question
Masterson, Inc., has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The
Masterson, Inc., has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a coupon rate of 7%, and sells for 95% of par. The second issue has a face value of $60 million, has a coupon rate of 6%, and sells for 107% of par. The first issue matures in 25 years, the second in 8 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 company's capital structure weights on a market value basis? C) Which are more relevant, the book or market value weights? Please use excel and explain the answer.
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