Vedder, Inc., has 6.4 million shares of common stock outstanding. The current sh
ID: 2640697 • Letter: V
Question
Vedder, Inc., has 6.4 million shares of common stock outstanding. The current share price is $61.40, and the book value per share is $4.40. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.4 million, a coupon rate of 7.4 percent, and sells for 96 percent of par. The second issue has a face value of $35.4 million, a coupon rate of 6.9 percent, and sells for 95 percent of par. The first issue matures in 18 years, the second in 10 years.
(a)
What are the company
Vedder, Inc., has 6.4 million shares of common stock outstanding. The current share price is $61.40, and the book value per share is $4.40. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.4 million, a coupon rate of 7.4 percent, and sells for 96 percent of par. The second issue has a face value of $35.4 million, a coupon rate of 6.9 percent, and sells for 95 percent of par. The first issue matures in 18 years, the second in 10 years.
Explanation / Answer
a) Based on book value
Book value weight of debt = 0.7898
b) Based on market value:
Book value weight of equity = 0.8185
Book value weight of debt = 0.1815
(Amount in million) Book value Weights Equity 28.16 0.2102 First bond 70.4 0.5255 Second bond 35.4 0.2643 Total 133.96 1.0000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.