Hero Manufacturing has 5 million shares of common stock outstanding. The current share price is $84 and the book value per share is $7. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $60 million and a coupon of 7 percent and sells for 94 percent of par. The second issue has a face value of $35 million and a coupon of 8 percent and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 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.)
a. Equity/Value Debt/Value
b. Equity/Value Debt/Value
c. Which are more relevant?
a. Market value weights
b. Book value weights