Question
Masterson, Inc., has 4.1 million shares of common stock outstanding. The current share price is $84, and the book value per share is $11. The
Masterson, Inc., has 4.1 million shares of common stock outstanding. The current share price is $84, and the book value per share is $11. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, has a coupon rate of 5.1 percent, and sells for 98 percent of par. The second issue has a face value of $50 million, has a coupon rate of 5.60 percent, and sells for 108 percent of par. The first issue matures in 20 years, the second in 12 years. |
a. | What are the companys 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 companys capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
c. | Which are more relevant, the book or market value weights? |
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