Question

Hero Manufacturing has 9 million shares of common stock outstanding. The current share price is $88 and the book value per share is $7. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $80 million and a coupon of 5 percent and sells for 98 percent of par. The second issue has a face value of $55 million and a coupon of 6 percent and sells for 106 percent of par. The first issue matures in 20 years, the second in 8 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.)

Answer 1

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