Erna Corp. has 8 million shares of common stock outstanding. The current share p

Question

Erna Corp. has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $7. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a coupon of 9 percent, and sells for 95 percent of par. The second issue has a face value of $45 million, has a coupon of 10 percent, and sells for 108 percent of par. The first issue matures in 24 years, the second in 7 years.

What are Erna’s capital structure weights on a book value basis? (Round your answer to 4 decimal places. (e.g., 32.1616))

What are Erna’s capital structure weights on a market value basis? (Round your answer to 4 decimal places. (e.g., 32.1616))

Which are more relevant, the book or market value weights?

What are Erna’s capital structure weights on a book value basis? (Round your answer to 4 decimal places. (e.g., 32.1616))

Explanation / Answer

Erna Corp. has 8 million shares of common stock outstanding. The current share p

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