Question

Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, 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 $75 million, a coupon of 8 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, a coupon of 9 percent, and sells for 107 percent of par. The first issue matures in 23 years, the second in 7 years.a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)

Equity/Value___________


Debt/Value ____________


b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)


Equity/Value ________Debt/Value ________

Answer 1

Answer: a. 0.6989

b. 0.2057

Step-by-step explanation:

The book value of equity is book value pee share multiplied by the number of shares. The book value of debt is the face value of a company's debt.

The attached picture shows the calculations.