(Related to Checkpoint? 15.1)???(Calculating capital structure? weights)??Winchell Investment Advisors is evaluating the capital structure of Ojai Foods....

90.2K

Verified Solution

Question

Finance

(Related to Checkpoint? 15.1)???(Calculating capital structure?weights)??Winchell Investment Advisors is evaluating the capitalstructure of Ojai Foods. ? Ojai's balance sheet indicates that thefirm has ?$48.26 million in total liabilities. Ojai has only?$40.15 million in? short- and? long-term debt on its balancesheet. ? However, because interest rates have fallen dramaticallysince the debt was? issued, Ojai's? short- and? long-term debt hasa current market price that is 10 percent over its book value or?$44.17 million. The book value of? Ojai's common equity is ?$49.77million but the market value of the equity is currently ?$99.72million.
b.??What is? Ojai's debt-to-enterprise-value ratio calculatedusing the market values of the? firm's debt and equity and assumingexcess cash is? zero?
c.??If you were trying to describe? Ojai's capital structure toa potential lender? (i.e., a? bank), would you use the?book-value-based debt ratio or the? market-value-baseddebt-to-enterprise-value? ratio?

Answer & Explanation Solved by verified expert

4.3 Ratings (777 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

(Related to Checkpoint? 15.1)???(Calculating capital structure?weights)??Winchell Investment Advisors is evaluating the capitalstructure of Ojai Foods. ? Ojai's balance sheet indicates that thefirm has ?$48.26 million in total liabilities. Ojai has only?$40.15 million in? short- and? long-term debt on its balancesheet. ? However, because interest rates have fallen dramaticallysince the debt was? issued, Ojai's? short- and? long-term debt hasa current market price that is 10 percent over its book value or?$44.17 million. The book value of? Ojai's common equity is ?$49.77million but the market value of the equity is currently ?$99.72million.b.??What is? Ojai's debt-to-enterprise-value ratio calculatedusing the market values of the? firm's debt and equity and assumingexcess cash is? zero?c.??If you were trying to describe? Ojai's capital structure toa potential lender? (i.e., a? bank), would you use the?book-value-based debt ratio or the? market-value-baseddebt-to-enterprise-value? ratio?