Erna corp has 5 million shares of common stock outstanding

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Reference no: EM13623076

Erna Corp. has 5 million shares of common stock outstanding. The current share price is $71 and the book value per share is $6. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $65 million, has a coupon of 6 percent and sells for 96 percent of par. The second issue has a face value of $45 million, has 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 Erna's capital structure weights on a book value basis? (to 4 decimal places)

Equity/Value -?

Debt/Value - ?

b. What are Erna's capital structure weights on a market value basis? ( to 4 decimal places)

Equity/Value - ?

Debt/Value - ?

c.Which are more relevant, the book or the market value weights?

Reference no: EM13623076

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