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Question: Dani Corp. has 5.5 million shares


Dani Corp. has 5.5 million shares of common stock outstanding. The current share price is $83, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate of 5.5 percent, and sells for 109 percent of par. The second issue has a face value of $45 million, a coupon rate of 5.8 percent, and sells for 108 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual coupon payments.
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?


2.99

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