Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon of 7 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon of 8 percent, and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years.

a.

What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e. g., 32.1616.)

Equity/Value

Debt/Value

Question

Business

Barrera

8 April, 01:49

Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon of 7 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon of 8 percent, and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years.

a.

What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e. g., 32.1616.)

Equity/Value

Debt/Value

+2

Answers (1)

Know the Answer?

Shea Mullen · Answer 1

The book value per share is $7 and there are a total of 6 million shares which means in order to find the equity value of the company we need to multiply the book value per share and the total number of shares.

So the value of equity is $42 million

The debt of the company is 70 million plus 50 million = $120 million

The total capital of the company is 120 million plus 42 million = $162 million

The Equity/Value = 42/162=0.2592=25.92%

The Debt/Value = 120/162=0.7407 = 74.07%