Filer Manufacturing has 11.1 million shares of common stock outstanding. The cur
ID: 2765807 • Letter: F
Question
Filer Manufacturing has 11.1 million shares of common stock outstanding. The current share price is $55, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $97 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $63.27 million, has a 7 percent coupon, and sells for 97.6 percent of par. The first issue matures in 9 years, the second in 5 years.
A. What is Filer's capital structure weight of equity on a book value basis? B. What is Filer's capital structure weight of debt on a book value basis? C. What is Filer's capital structure weight of equity on a market value basis? D. What is Filer's capital structure weight of debt on a market value basis?
Explanation / Answer
Answer:
Book Value Weight
Capital Structure
Book Value
Book Value Weight (Book Value / Total Book Value)
Common Stock
$55,500,000
$55,500,000 / $215,770,000 = 0.257
First Bond
$97,000,000
$97,000,000 / $215,770,000 = 0.450
Second Bond
$63,270,000
$63,270,000 / $215,770,000 = 0.293
Total Value
$215,770,000
1.000
Weight of Equity on book value basis = 0.257
Weight of Debt on Book Value basis = 0.450+0.293 = 0.743
Market Value Weight
Capital Structure
Market Value
Market Value Weight (Market Value / Total Market Value)
Common Stock (11.1 million x $55)
$610,500,000
$610,500,000 / $763,431,520 = 0.800
First Bond ($97,000,000 x 94%)
$91,180,000
$91,180,000 / $763,431,520 = 0.119
Second Bond ($63,270,000 x 97.6%)
$61,751,520
$61,751,520 / $763,431,520 = 0.081
Total Value
$763,431,520
1.000
Weight of Equity on Market Value basis = 0.80
Weight of Debt on Market Value basis = 0.119 + 0.081 = 0.20
Capital Structure
Book Value
Book Value Weight (Book Value / Total Book Value)
Common Stock
$55,500,000
$55,500,000 / $215,770,000 = 0.257
First Bond
$97,000,000
$97,000,000 / $215,770,000 = 0.450
Second Bond
$63,270,000
$63,270,000 / $215,770,000 = 0.293
Total Value
$215,770,000
1.000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.