ADMS 3530 Lecture Notes - Risk Premium, Weighted Arithmetic Mean, Capital Structure

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amethystarmadillo670

11 Apr 2013

School

York University

Department

Administrative Studies

Course

ADMS 3530

Professor

Lois King

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Document Summary

Tyler manufacturing has 9. 5 million shares of common stock outstanding. The current share price is , and the book value per share is . Tyler manufacturing also has two bond issues outstanding. The first bond issue has a face value of million and an 8% coupon and sells for 93% of par. The second issue has a face value of million and a. 7. 5% coupon and sells for 96. 5% of par. The first issue matures in 10 years, the second in. Solution: the book value of equity is the book value per share times the number of shares, and the book value of debt is the face value of the company"s debt, so: So, the total value of the company is: And the book value weights of equity and debt are: D/v = 1 e/v = . 7397: the market value of equity is the share price times the number of shares, so:

Related Questions

Book Value versus Market Value. Bonaime, Inc., has 3.9 million shares of common stock outstanding. The current share price is $84, and the book value per share is $11. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 6.3 percent, and sells for 98 percent of par. The second issue has a face value of $50 million, a coupon rate of 5.8 percent, and sells for 97 percent of par. The first issue matures in 20 years, the second in 12 years.

A) What are the company's capital structure weights on a book value basis?

B) What are the company's capital structure weights on a market value basis?

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

crimsoncrocodile845

Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 6 percent, and sells for 96 percent of par. The second issue has a face value of $45 million, a coupon of 7 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 5 years. (a) What are the company's capital structure weights on a book value basis? (b) What are the companyâs capital structure weights on a market value basis? (c) Which are more relevant, the book or market value weights?

Vedder, Inc., has 6.3 million shares of common stock outstanding. The current share price is $61.30, and the book value per share is $4.30. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.3 million, a coupon rate of 7.3 percent, and sells for 96.5 percent of par. The second issue has a face value of $35.3 million, a coupon rate of 6.8 percent, and sells for 95.5 percent of par. The first issue matures in 19 years, the second in 11 years. Required:

(a) What are the companyâs capital structure weights on a book value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).) Book value weight of equity Book value weight of debt

(b) What are the companyâs capital structure weights on a market value basis? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).) Market value weight of equity Market value weight of debt

ADMS 3530 Lecture Notes - Risk Premium, Weighted Arithmetic Mean, Capital Structure

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