Filer Manufacturing has 8700000 shares of common stock outstanding. The current

Question

Filer Manufacturing has 8700000 shares of common stock outstanding. The current share price is $79.18, and the book value per share is $7.04. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $74000000, has a 0.07 coupon, matures in 13 years and sells for 100 percent of par. The second issue has a face value of $70000000, has a 0.05 coupon, matures in 12 years, and sells for 95 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)

Explanation / Answer

Total market vallue of the shares = 870000*79.18 = 688866000

Total market value of bonds = 100%*74000000 +95*70,000,000 =140500000

Total marlet value fo firm =688866000 +140500000 =829366000

Fier weight on debt =

829366000

= 16.9407%

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