Pandora Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7 percent and sells for 97 percent of par. The second issue
Pandora Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7 percent and sells for 97 percent of par. The second issue
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 14P
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Pandora Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7 percent and sells for 97 percent of par. The second issue has a face value of $50 million and a coupon rate of 8 percent and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years.
a.
What are the company’s capital structure weights on a book value basis? (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? (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?
a. Equity/Value:
Debt/Value:
b. Equity/Value:
Debt/Value:
c.More relevant:
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