Filer Manufacturing has 12.1 million shares of common stock outstanding. The cur
ID: 1170704 • Letter: F
Question
Filer Manufacturing has 12.1 million shares of common stock outstanding. The current share price is $46, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $96 million, has a 8 percent coupon, and sells for 94 percent of par. The second issue has a face value of $70.18 million, has a 8 percent coupon, and sells for 98.4 percent of par. The first issue matures in 10 years, the second in 5 years. Requirement 1: (a) What is Filers capital structure weight of equity on a book value basis? (Do not round your intermediate calculations.) (Click to select) (b) What is Filer's capital structure weight of debt on a book value basis? (Do not round your intermediate calculations.) (Click to select) * Requirement 2: (a) What is Filers capital structure weight of equity on a market value basis? (Do not round your intermediate calculations.) (Click to select) b) What is Filer's capital structure weight of debt on a market value basis? (Do not round your intermediate calculations.) (Click toselect -Explanation / Answer
1(a)
Book Value of Equity = (Book Value Per Share) * (number of shares)
= $5 * 12.1 Million
= $60.5 Million ...(1)
Book Value of Debt = Total Face Value of Debt = $96 Million + $70.18 Million
= $166.18 Million? ...(2)
Adding (1) & (2) -
Book Value of total Capital = Book Value of Equity + Book Value of Debt
= $60.5 Million + $166.18 Million
= $226.68 Million? ...(3)
Equity weight based on book value = EBV/totalCapitalBV = 60.5 M/226.68 M = 26.69 % (rounded)
{dividing (1) by (3)}
1(b)
Debt weight based on book value = DBV/totalCapitalBV = 166.18 M/226.68 M = 73.31 % (rounded)
{dividing (2) by (3)}
2(a)
Market Value of Equity = (Price Per Share) * (number of shares)
= $46 * 12.1 Million
= $556.6 Million ...(4)
Market Value of Debt = (FaceValueDebt1 * PriceQuote1) + (FaceValueDebt2 * PriceQuote2)
= ($96 Million * 0.94) + ($70.18 Million * 0.984)
= $90.24 M + $69.05712 M
= $159.29712 Million? ...(5)
Adding (4) & (5) -
Market Value of total Capital = Market Value of Equity + Market Value of Debt
= $556.6 Million + $159.29712 Million
= $715.89712 Million? ...(6)
Equity weight based on market value = EMarketV/totalCapitalMarketV = 556.6 M/715.89712 M = 77.75 % (rounded)
{dividing (4) by (6)}
2(b)
Debt weight based on market value = DMarketV/totalCapitalMarketV = 159.29712 M/715.89712 M = 22.25 % (rounded)
{dividing (5) by (6)}
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