Dinklage Corp. has 4 million shares of common stock outstanding. The current sha

Question

Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $90 million, a coupon of 5 percent, and sells for 94 percent of par. The second issue has a face value of $70 million, a coupon of 6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 3 years. a. What are the company's capital structure weights on a book value basis?

Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $90 million, a coupon of 5 percent, and sells for 94 percent of par. The second issue has a face value of $70 million, a coupon of 6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 3 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?

Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $90 million, a coupon of 5 percent, and sells for 94 percent of par. The second issue has a face value of $70 million, a coupon of 6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 3 years.

Explanation / Answer

a calculation of the capital structure weights on book value basis calculation of total book value a common stock 4000000 * 5 b common stock 20000000 c first bond issue 90000000 d second bond 70000000 e total book value b + c + d f total book value 180000000 capital structure weight of common stock 20000000 / 180000000 capital structure weight of common stock 0.11 capital structure weight of first issue 90000000 / 180000000 capital structure weight of first issue 0.50 capital structure weight of second issue 70000000 / 180000000 capital structure weight of second issue 0.39 capital structure weight of equity 11% capital structure weight of debt 0.50 + 0.38 capital structure weight of debt 89% b calculation of the capital structure weights on market value basis calculation of total market value a common stock 4000000 * 76 b common stock 304000000 c first bond issue 90000000 * 94 % d first bond issue 84600000 e second bond 70000000 * 104 % f second bond 72800000 g total book value b + d + f h total book value 461400000 capital structure weight of common stock 304000000 / 461400000 capital structure weight of common stock 0.66 capital structure weight of first issue 84600000 / 461400000 capital structure weight of first issue 0.18 capital structure weight of second issue 728000000 / 4614000000 capital structure weight of second issue 0.16 capital structure weight of equity 66% capital structure weight of debt 0.18 + 0.16 capital structure weight of debt 34%

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