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Problem: Erna Corp. Have 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. Erna Corp. as well has two bond issues outstanding. The first bond issue has the face value of $70 million, has a coupon of 7 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, has 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 Erna’s capital structure weights on book value basis?

b. What are Erna’s capital structure weights on market value basis?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93590

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