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Pandora Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $5. The
Pandora Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 9 percent and sells for 99 percent of par. The second issue has a face value of $60 million and a coupon rate of 10 percent and sells for 108 percent of par. The first issue matures in 24 years, the second in 8 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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