8 Hero Manufacturing has 10 million shares of common stock outstanding. The current share price is $82...

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Finance

8
Hero Manufacturing has 10 million shares of common stockoutstanding. The current share price is $82 and the book value pershare is $5. The company also has two bond issues outstanding, bothwith semiannual coupons. The first bond issue has a face value $85million and a coupon of 5 percent and sells for 97 percent of par.The second issue has a face value of $55 million and a coupon of 6percent and sells for 105 percent of par. The first issue maturesin 20 years, the second in 9 years.
a.
What are the company's capital structure weights on a book valuebasis? (Do not round intermediate calculations and roundyour answers to 4 decimal places, e.g., .1616.)
b. What are the company's capital structure weights on a marketvalue basis? (Do not round intermediate calculations andround your answers to 4 decimal places, e.g., .1616.)

c.
Which are more relevant?

Market value weights
Book value weights

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3.8 Ratings (400 Votes)

a MV of equityPrice of equitynumber of shares outstanding MV of equity510000000 50000000 MV of Bond1Par valuebonds outstandingage of par MV of Bond11000850001 85000000 MV of Bond2Par valuebonds See Answer

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8Hero Manufacturing has 10 million shares of common stockoutstanding. The current share price is $82 and the book value pershare is $5. The company also has two bond issues outstanding, bothwith semiannual coupons. The first bond issue has a face value $85million and a coupon of 5 percent and sells for 97 percent of par.The second issue has a face value of $55 million and a coupon of 6percent and sells for 105 percent of par. The first issue maturesin 20 years, the second in 9 years.a.What are the company's capital structure weights on a book valuebasis? (Do not round intermediate calculations and roundyour answers to 4 decimal places, e.g., .1616.)b.What are the company's capital structure weights on a marketvalue basis? (Do not round intermediate calculations andround your answers to 4 decimal places, e.g., .1616.) c.Which are more relevant? Market value weightsBook value weights

a.	What are the company's capital structure weights on a book valuebasis? (Do not round intermediate calculations and roundyour answers to 4 decimal places, e.g., .1616.)
b.	What are the company's capital structure weights on a marketvalue basis? (Do not round intermediate calculations andround your answers to 4 decimal places, e.g., .1616.)