Vedder, Inc., has 7.3 million shares of common stock outstanding. The current sh
ID: 2645516 • Letter: V
Question
Vedder, Inc., has 7.3 million shares of common stock outstanding. The current share price is $62.30, and the book value per share is $5.30. Vedder also has two bond issues outstanding. The first bond issue has a face value of $71.3 million, a coupon rate of 7.3 percent, and sells for 91.5 percent of par. The second issue has a face value of $36.3 million, a coupon rate of 7.8 percent, and sells for 90.5 percent of par. The first issue matures in 19 years, the second in 11 years.
(a)
What are the company
Required:(a)
What are the company
Explanation / Answer
Statement showing computation on the basis of Book Value Stock Number Price Market Value Weight Common Stock 7,300,000.00 5.30 38,690,000.00 0.2645 Bond issue 1 71,300.00 1,000.00 71,300,000.00 0.4874 Bond issue 2 36,300.00 1,000.00 36,300,000.00 0.2481 146,290,000.00 1.0000 Book Value weight of Equity 0.2645 Book Value weight of Debt(Debt 1 + Debt 2) 0.7355 Statement showing computation on the basis of Market Value Stock Number Price Market Value Weight Common Stock 7,300,000.00 62.30 454,790,000.00 0.8226 Bond issue 1 71,300.00 915.00 65,239,500.00 0.1180 Bond issue 2 36,300.00 905.00 32,851,500.00 0.0594 552,881,000.00 1.0000 Market Value weight of Equity 0.8226 Market Value weight of Debt (Debt 1 + Debt 2) 0.1774 Market Value weights are more relevant as they depit true picture of the position of the company
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