Vedder, Inc., has 6.2 million shares of common stock outstanding. The current sh
ID: 2630650 • Letter: V
Question
Vedder, Inc., has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.2 million, a coupon rate of 7.2 percent, and sells for 97 percent of par. The second issue has a face value of $35.2 million, a coupon rate of 6.7 percent, and sells for 96 percent of par. The first issue matures in 22 years, the second in 14 years.
(a)
What are the company
Vedder, Inc., has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.2 million, a coupon rate of 7.2 percent, and sells for 97 percent of par. The second issue has a face value of $35.2 million, a coupon rate of 6.7 percent, and sells for 96 percent of par. The first issue matures in 22 years, the second in 14 years.
Explanation / Answer
a)
Particulars
Amount ($ Million)
Weights
Book value weight of equity
6.2*4.2
= 26.04
(26.04/131.44)
= 0.1981
Or 19.81%
Book value weight of debt
70.2 + 35.2
= 105.40
(105.40/131.44)
= 0.8019
Or 80.19%
Total
131.44
b)
Particulars
Amount ($ Million)
Weights
Market value weight of equity
6.2*61.2
= 379.44
(379.44/481.326)
= 0.7883
or 78.83%
Market value weight of debt
(70.2*0.97) + (35.2*0.96)
= 68.094 + 33.792
= 101.886
(101.886/481.326)
= 0.2117
0r 21.17%
Total
481.326
..
c)Market value weights are more relevant
a)
Particulars
Amount ($ Million)
Weights
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.