 Business
9 October, 23:12

# Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is \$83, and the book value per share is \$8. The company also has two bond issues outstanding. The first bond issue has a face value of \$90 million, a coupon of 6 percent, and sells for 98 percent of par. The second issue has a face value of \$60 million, a coupon of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 years. a. What are the company's capital structure weights on a book value basis? Equity/Value = Debt/Value=

+1
1. 10 October, 00:23
0
0.175824; 0.8242

Explanation:

Equity 1 = Shares of common stock outstanding * Book value per share

= 4,000,000 * \$8

= \$32,000,000

Debt 1 = \$90,000,000

Debt 2 = \$60,000,000

Total value = Equity 1 + Debt 1 + Debt 2

= \$32,000,000 + \$90,000,000 + \$60,000,000

= \$182,000,000

Weight of equity 1:

= Equity 1 : Total value

= \$32,000,000 : \$182,000,000

= 0.175824

Weight of debt 1:

= Debt 1 : Total value

= \$90,000,000 : \$182,000,000

= 0.494505

Weight of debt 2:

= Debt 1 : Total value

= \$60,000,000 : \$182,000,000

= 0.32967

Equity/Value = 0.175824

Debt/Value = Weight of debt 1 + Weight of debt 2

= 0.494505 + 0.32967

= 0.8242