Bob, Inc., has 7.5 million shares of common stock outstanding. The current share
ID: 2629242 • Letter: B
Question
Bob, Inc., has 7.5 million shares of common stock outstanding. The current share price is $62.50, and the book value per share is $5.50. Bob also has two bond issues outstanding. The first bond issue has a face value of $71.5 million, a coupon rate of 7 percent, and sells for 90.5 percent of par. The second issue has a face value of $36.5 million, a coupon rate of 8 percent, and sells for 89.5 percent of par. Book value is the same as face value. 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?
Book value weight of equity=
Book value weight of debt =
(b)
What are the companys capital structure weights on a market value basis?
Market value weight of equity=
Market value weight of debt=
Bob, Inc., has 7.5 million shares of common stock outstanding. The current share price is $62.50, and the book value per share is $5.50. Bob also has two bond issues outstanding. The first bond issue has a face value of $71.5 million, a coupon rate of 7 percent, and sells for 90.5 percent of par. The second issue has a face value of $36.5 million, a coupon rate of 8 percent, and sells for 89.5 percent of par. Book value is the same as face value. 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?
Book value weight of equity=
Book value weight of debt =
(b)
What are the companys capital structure weights on a market value basis?
Market value weight of equity=
Market value weight of debt=
Explanation / Answer
Particulars
Book Value (in million)
Market Value (in million)
Equity
Particulars
Book Value (in million)
Market Value (in million)
Equity