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69.
Filer Manufacturing has 11 million shares of common stock outstanding with a $68 share
price, and a book value of $6 per share. Filer Manufacturing also has two bond issues
outstanding. The first bond issue has a face value of $70 million, has a 7 percent
coupon, and sells for 93 percent of par. The second issue has a face value of $55 million,
has an 8 percent coupon, and sells for 104 percent of par. The first issue matures in 21
years, the second in 6 years. What are Filer's capital structure weights on a book value
basis? What are Filer's capital structure weights on a market value basis? Which are
more relevant, the book or market value weights? Why?
Bond 1 Bond 2
Shares (millions)
Face value (millions)
Current stock price
Coupon
Book value per share
Price (% of PAR)
Book Value (millions)
Market Value (millions)
Equity
Equity
Bond 1
Bond 1
Bond 2
Bond 2
Total
Total

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