Filer Manufacturing has 10.1 million shares of common stock outstanding. The cur

Question

Filer Manufacturing has 10.1 million shares of common stock outstanding. The current share price is $59, and the book value per share is $6. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $81 million, has a 7 percent coupon, and sells for 91 percent of par. The second issue has a face value of $68.68 million, has a 7 percent coupon, and sells for 95.4 percent of par. The first issue matures in 10 years, the second in 6 years. Requirement 1: (a) What is Filer's capital structure weight of equity on a book value basis? (Do not round your intermediate calculations.) (b) What is Filer's capital structure weight of debt on a book value basis? (Do not round your intermediate calculations.) Requirement 2: (a) What is Filer's capital structure weight of equity on a market value basis? (Do not round your intermediate calculations.) (b) What is Filer's capital structure weight of debt on a market value basis? (Do not round your intermediate calculations.)

Explanation / Answer

capital structure no of shares par value book value shares of common stock 10100000 6 60600000 first bond 81000000 2nd bond 68680000 book value of capital structure 210280000 book value weight of equity 28.82% book value weight of debt 71.18% book value and no of shares market value market value shares of common stock 10100000 59 595900000 first bond 81000000 91% 73710000 2nd bond 68680000 95.40% 65520720 book value of capital structure 735130720 Market value weight of equity 81.06% market valueweight of debt 18.94%

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