Vedder, Inc., has 6.8 million shares of common stock outstanding. The current sh

Question

Vedder, Inc., has 6.8 million shares of common stock outstanding. The current share price is $61.80, and the book value per share is $4.80. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.8 million, a coupon rate of 7.3 percent, and sells for 94 percent of par. The second issue has a face value of $35.8 million, a coupon rate of 7.3 percent, and sells for 93 percent of par. The first issue matures in 19 years, the second in 11 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).)

Vedder, Inc., has 6.8 million shares of common stock outstanding. The current share price is $61.80, and the book value per share is $4.80. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.8 million, a coupon rate of 7.3 percent, and sells for 94 percent of par. The second issue has a face value of $35.8 million, a coupon rate of 7.3 percent, and sells for 93 percent of par. The first issue matures in 19 years, the second in 11 years.

Explanation / Answer

Vedder Inc. Book Value capital structure Book Value Market Value

common stock 6,800,000 shares*4.80= $ 32,640,000 ($61.80) 420,240,000

first bond 708,000 bonds * 100 =$ 70,800,000 ($94) 66,552,000

secound 358,000 bonds * 100 =$ 35,800,000 ($93) 33,294,000

so the weights book value market value

common stock 0.234 0.808

first bond 0.509 0.128

second 0.257 0.064

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.