Filer Manufacturing has 8.2 million shares of common stock outstanding. The current share price is $52, and
Question:
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?
Step by Step Answer:
To calculate Filer Manufacturings capital structure weights both on a book value basis and on a market value basis we need to consider the various components of its capital structure which include com...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
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