Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 years, the second in 5 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. What are the company's capital structure weights on a market value basis? Note: 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?

Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 years, the second in 5 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. What are the company's capital structure weights on a market value basis? Note: 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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

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