Dinklage Corp. has 6 million shares of common stock outstanding. The current sha

Question

Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, a coupon of 6 percent, and sells for 96 percent of par. The second issue has a face value of $60 million, a coupon of 7 percent, and sells for 109 percent of par. The first issue matures in 21 years, the second in 9 years.

What are the company's capital structure weights on a book value basis?

What are the company’s capital structure weights on a market value basis?

What are the company’s capital structure weights on a market value basis?

Explanation / Answer

Answer:

(Ans) (Ans) Nos Book Value Calculations Book value Weights Market Value Calculations Market value Weights Common Stock 6000000 48000000 (6,000,000*$8) 24.87% 534000000 (6,000,000*$89) 78.41% Bond 1 85000000 44.04% 81600000 ($85,000,000*96%) 11.98% Bond 2 60000000 31.09% 65400000 ($60,000,000*109%) 9.60% 193000000 100.00% 681000000 100.00%

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