Vedder, Inc., has 7.2 million shares of common stock outstanding. The current sh
ID: 2714740 • Letter: V
Question
Vedder, Inc., has 7.2 million shares of common stock outstanding. The current share price is $62.20, and the book value per share is $5.20. Vedder also has two bond issues outstanding. The first bond issue has a face value of $71.2 million, a coupon rate of 7.2 percent, and sells for 92 percent of par. The second issue has a face value of $36.2 million, a coupon rate of 7.7 percent, and sells for 91 percent of par. The first issue matures in 22 years, the second in 14 years.
a.) What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)
b.) What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)
Explanation / Answer
a.) What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).) Ans) Total Value Capital Structure Weight Vedder Inc Share of common Stock $ 7,200,000 Current Share Price $ 5.20 Commom Stock on Book Value $ 37,440,000 $ 37,440,000 24% First bonds 71.2 Million Book Value 71.20*100/92 $ 77.39 $ 77 10,00,000 $ 77,391,304 50% Second Value 36.2 Million Book Value 36.2*100/91 39.78021978 $ 40 10,00,000 $ 39,780,220 26% Total Capital $ 154,611,524 b.) What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).) Ans) Vedder Inc Total Value Capital Structure Weight Share of common Stock $ 7,200,000 Current Share Price $ 62.20 Commom Stock on Market price $ 447,840,000 $ 447,840,000 81% First bonds 71.2 Million 10,00,000 $ 71,200,000 13% Second Value 36.2 Million 10,00,000 $ 36,200,000 7% Total Capital Contribution $ 555,240,000 100%
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