Vedder, Inc., has 7.6 million shares of common stock outstanding. The current sh
ID: 2719850 • Letter: V
Question
Vedder, Inc., has 7.6 million shares of common stock outstanding. The current share price is $62.60, and the book value per share is $5.60. Vedder also has two bond issues outstanding. The first bond issue has a face value of $71.6 million, a coupon rate of 7.1 percent, and sells for 90 percent of par. The second issue has a face value of $36.6 million, a coupon rate of 8.1 percent, and sells for 89 percent of par. The first issue matures in 21 years, the second in 13 years.
(a)
What are the company’s capital structure weights on a book value basis?
(b)
What are the company’s capital structure weights on a market value basis?
Vedder, Inc., has 7.6 million shares of common stock outstanding. The current share price is $62.60, and the book value per share is $5.60. Vedder also has two bond issues outstanding. The first bond issue has a face value of $71.6 million, a coupon rate of 7.1 percent, and sells for 90 percent of par. The second issue has a face value of $36.6 million, a coupon rate of 8.1 percent, and sells for 89 percent of par. The first issue matures in 21 years, the second in 13 years.
(a)
What are the company’s capital structure weights on a book value basis?
(b)
What are the company’s capital structure weights on a market value basis?
Explanation / Answer
Particulars
Number (in Million)
Book Value per unit ($)
Book Value (in Million $)
Weight
Common stock
7.6
5.6
42.56
28.32%
7.1% Bonds
71.6
47.40%
8.1% Bonds
36.6
24.28%
Total
150.76
100%
Particulars
Number (in Million)
Market value per unit ($)
Market Value (in Million $)
Weight
Common stock
7.6
62.6
475.76
83.06%
7.1% Bonds
64.44
11.24%
8.1% Bonds
32.574
5.7%
Total
572.774
100%
Particulars
Number (in Million)
Book Value per unit ($)
Book Value (in Million $)
Weight
Common stock
7.6
5.6
42.56
28.32%
7.1% Bonds
71.6
47.40%
8.1% Bonds
36.6
24.28%
Total
150.76
100%
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