Filer Manufacturing has 9 million shares of common stock outstanding. The curren

Question

Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value $80 million, a coupon of 10%, and sells for 96% of par. The second issue has a face value of $50 million, a coupon of 11%, and sells for 104% of par. The first issue matures in 25 years, the second in 8 years.

A) What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your ansers to 4 decimal places)

1) Equity/Value ____________

2) Debt/Value_____________

B) What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places)

1) Equity/Value____________ (The answer is not 0.0056)

2) Debt/Value______________ (The answer is not 0.9943)

C) Which are more relevent?

1) Market value weights

2) Book value weights

********Please have someone who konws how to calculate this problem complete it because the last time I posted this question it was wrong******

Explanation / Answer

Answer:A) Book value of equity=9 million share*$8=$72 million

Book value of Debt is the face value of Debt

First Bond=$80 million

Second Bond=$50 million

Total bond book value=$80 million+$50 million

=$130 million

Answer:B) Market value of Equity=9 million share*$81=$729 million

Market value of Bonds:

First bond Market value=$80 million*96%=$76.8 million

Second Bond Market value=$50 million*104%=$52 million

Total Debt value=$76.8+$52=128.8 million

Answer:C) 1) Market value weights

Capital Structure Book value (million) Weight Debt 130 0.6436 Equity 72 0.3564 Total 202

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