Filer Manufacturing has 8.2 million shares of common stock outstanding. The current share price is $52, and

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Filer Manufacturing has 8.2 million shares of common stock outstanding. The current share price is $52, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70 million, an 8 percent coupon, and sells for 104 percent of par. The second issue has a face value of $50 million, a 7.5 percent coupon, and sells for 97 percent of par. The first issue matures in 10 years, the second in 6 years.

a. What are Filer’s capital structure weights on a book value basis?

b. What are Filer’s capital structure weights on a market value basis?

c. Which are more relevant, the book or market value weights? Why?

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Fundamentals Of Corporate Finance

ISBN: 9780072553079

6th Edition

Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan

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