1. Toe Cheese Farms has hired Kerry Kickbutt to be the new financial manager. The right side of the balance sheet looks like this:

Balance Sheet

Debt is

600 Million

Common

300 Million

Preferred

100 Million

= Total Debt & Equity 1000 Million

The number of securities outstanding and market prices are as follows:

Debt: 600,000 bonds selling for $1025 each Common: 10,000,000 shares selling for $126 each Preferred: 1,000,000 shares selling for $125 each

a). Using the above, what would Kerry say the book value weights are for Toe Cheese Farms? (10 pts)

b) What would Kerry say the market value weights are for Toe Cheese Farms? (10 pts)

c) Which of the two types of weights above is more accurate? Would using target weights be better? Why or why not? (5 pts)