1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Zielflug [23.3K]
3 years ago
5

Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $85 and the book value per share

is $8. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $65 million and a coupon of 8 percent and sells for 95 percent of par. The second issue has a face value of $40 million and a coupon of 9 percent and sells for 108 percent of par. The first issue matures in 23 years, the second in 5 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., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant? Market value weights Book value weights
Business
1 answer:
rusak2 [61]3 years ago
4 0

Answer:

1. Book value of equity

6 million x 8 = 48million

Book value of debt = 65 + 40 = 105 million

Total value = 105 + 48 = 153 million

Weight of equity = 48/153 = 0.3137

Weight of debt = 105/153 = 0.6863

2. Market value

= 6 million x 85 = 510million

= Market value of debt = (65m * 0.95) + (40m * 1.08)

= 61.75m + 43.2m

= 104.95million

Total value = 104.95 + 510 = 614.95million

Weight of equity on market value = 510/614.95 = 0.8293

Weight of debt on market value = 104.95/614.95 = 0.1707

3. Market value of weights are more relevant

You might be interested in
EBay A. is a market because buyers and sellers are brought together to buy and sell. B. cannot function as a market. C. would be
IgorLugansk [536]

Answer:

A. is a market because buyers and sellers are brought together to buy and sell.

Explanation:

The definition of market is that it is a place where sellers of products and services meet with potential buyers. Acording to this definition, Ebay can be considered a market because in this website there are sellers offering different types of products and buyers willing to pay in order to get them.

3 0
3 years ago
U.S. residents accounted for over 75 percent of cruise ship passengers, and U.S. ports had 8 million passengers leaving on cruis
Elenna [48]

Answer:

e. External opportunity

Explanation:

An  external opportunity is an extension of the market due to some external development outside the industry. In this case, the cruise industry has benefited in a major way due to external developments.

7 0
3 years ago
Consider two spices, cumin and paprika, to be substitutes, a decrease in the supply of paprika, should cause an increase in the
makvit [3.9K]

Answer:

an increase in the price of both

Explanation:

A decrease in the supply of paprika would cause an increase in the price of both substitute goods. When the supply of paprika falls, the demand will be greater than what is available for sale and this would cause the sellers to raise it's price afterall it is now scarce.

Also as a substitute good, more people would begin to switch to buying cummin which would raise the demand for cummin. This increase in demand for cummin would then cause the price of cummin to go up.

3 0
3 years ago
psc 41 Assuming that the claim is correct - that a large vocabulary is associated to a large income - generate an alternate expl
Hitman42 [59]

Answer:

Lower-income people can have a large vocabulary as well, because of a variety of circumstances. To list a few:

The low-income person may have a job that includes a constant contact with highly-educated people.

The low-income person may himself be a well-educated person who holds a job that does not pay a lot, for example: librarian, or social worker.

The low-income person may live in an area with a great degree of demographic diversity, and even by fluent in several languages because of that. This is common in merchants, who may own a small business that only pays enough to survive, but who have a great degree of contact with many sorts of people.

5 0
3 years ago
As jamal's income rises, his demand for pizza does not change. it follows that, for jamal, pizza is a(n)
irga5000 [103]
<span>The pizza is a neutral good. A neutral good is a good whose demand is not changed even though the income provided by the good is changed. A person's income can go either up or down, but their desire to buy more or less of Jamal's pizza will not change, so pizza sales will not go up or down. Demand and income are not tied to each other.</span>
8 0
3 years ago
Other questions:
  • Find both the arithmetic growth rate and the geometric growth rate of the dividends for Custer's Ice Cream Shoppes.
    12·1 answer
  • During the year, Apex Co. sold an unprofitable component of the company. The component had a net loss from operations during the
    12·1 answer
  • The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance. The follow
    9·1 answer
  • An outward shift of a nation's production possibilities curve: a. does not ensure the nation of an increase in real GDP. b. ensu
    10·2 answers
  • 6. When food is plated with prime rib in front, puréed turnips at the rear, and a salad topped with Italian cheeses beside them,
    7·1 answer
  • Margaret, a consumer in a DTPA lawsuit, was able to prove that the licensee in her suit knowingly failed to disclose information
    7·1 answer
  • Armour, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was esti
    5·1 answer
  • What is insourced warehousing? a. A practice that encourages you to work together with your supplier to improve demand forecasts
    9·1 answer
  • Joe is self-employed in a store that has a rental value of $500 a month which he pays, but he can vacate the building without gi
    7·1 answer
  • Most insurance companies will waive surrender charges in the event EXCEPT:
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!