Filer Manufacturing has 6300000 shares of common stock outstanding. The current

Question

Filer Manufacturing has 6300000 shares of common stock outstanding. The current share price is $72.09, and the book value per share is $4.41. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $55000000, has a 0.05 coupon, matures in 5 years and sells for 81 percent of par. The second issue has a face value of $79000000, has a 0.04 coupon, matures in 24 years, and sells for 97 percent of par. What is Filer's weight of equity on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)

Explanation / Answer

The market value of equity is the share price times the number of shares:

Equity = $ 6300000 ($72.09) = $454,167,000

The total market value of debt is the price quote times the par value of the bond.

Therefore: Debt = 0.81 ($55,000,000)+0.97 ($79,000,000) = $121180000

This makes the total market value of the company equal to

$454,167,000 +$121180000= $575347000

and the market value weights of equity and debt are: Equity/Value = $454167000/$575347000= 0.789

Debt / Value = 1- Equity/Value=0.211

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.