Filer Manufacturing has 10.1 million shares of common stock outstanding. The cur
ID: 2716741 • Letter: F
Question
Filer Manufacturing has 10.1 million shares of common stock outstanding. The current share price is $50, and the book value per share is $4. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $88 million, has a 9 percent coupon, and sells for 93 percent of par. The second issue has a face value of $58.58 million, has a 9 percent coupon, and sells for 95.8 percent of par. The first issue matures in 9 years, the second in 6 years.
What is Filer's capital structure weight of equity on a book value basis? (Do not round your intermediate calculations.)
(Click to select)0.2247
0.2161
0.2269
0.2225
0.2053
What is Filer's capital structure weight of debt on a book value basis? (Do not round your intermediate calculations.)
(Click to select)0.8153
0.7447
0.8231
0.7839
0.8075
What is Filer's capital structure weight of equity on a market value basis? (Do not round your intermediate calculations.)
(Click to select)0.8247
0.8168
0.809
0.7854
0.7462
What is Filer's capital structure weight of debt on a market value basis? (Do not round your intermediate calculations.)
(Click to select)0.2038
0. 2146
0. 221
0. 2253
0. 2232
Filer Manufacturing has 10.1 million shares of common stock outstanding. The current share price is $50, and the book value per share is $4. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $88 million, has a 9 percent coupon, and sells for 93 percent of par. The second issue has a face value of $58.58 million, has a 9 percent coupon, and sells for 95.8 percent of par. The first issue matures in 9 years, the second in 6 years.
Explanation / Answer
Requirement 1:
Book Value of Equity = 10.1*4 = $ 40.40 Million
Book value of Debt = first bond issue Face Value + second issue bond face value
Book value of Debt = 88 + 58.58
Book value of Debt = $ 146.58 Million
Total Book Value = 40.40 + 146.58
Total Book Value = $ 186.98
(a)What is Filer's capital structure weight of equity on a book value basis? (Do not round your intermediate calculations.)
Weight of equity on a book value basis = Book Value of Equity /Total Book Value
Weight of equity on a book value basis = 40.40/186.98
Weight of equity on a book value basis = 0.2161
Answer
0.2161
(b)What is Filer's capital structure weight of debt on a book value basis? (Do not round your intermediate calculations.)
Weight of debt on a book value basis = Book Value of Debt /Total Book Value
Weight of debt on a book value basis = 146.58/186.98
Weight of debt on a book value basis = 0.7839
Answer
0.7839
Requirement 2:
Market Value of Equity = 10.1*50 = $ 505 Million
Market value of Debt = first bond issue Face Value *93% + second issue bond face value*95.8%
Market value of Debt = 88*93% + 58.58*95.8%
Market value of Debt = $ 137.96 Million
Total Market Value = 505+137.96
Total Market Value = $ 642.96
(a)What is Filer's capital structure weight of equity on a market value basis? (Do not round your intermediate calculations.)
Weight of equity on a market value basis = Market Value of Equity /Total market Value
Weight of equity on a market value basis = 505/642.96
Weight of equity on a market value basis = 0.7854
Answer
0.7854
(b)What is Filer's capital structure weight of debt on a market value basis? (Do not round your intermediate calculations.)
Weight of debt on a market value basis = Market Value of debt /Total market Value
Weight of debt on a market value basis = 137.96/642.96
Weight of debt on a market value basis = 0.2146
Answer
0. 2146
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