Company A has 6 million shares of common stock outstanding. The current share price is $61, and the book value per share is $4. Regions also has two bond issues outstanding. The first bond issue has a face value of $70 million, a 7% coupon, and sells for 98% of par. The second issue has a face value of $35 million, a 6.5% coupon and sells for 97% of par. The first issue matures in 20 years, the second matures in 12 years.
a. What are the company’s capital structure weights on a book value basis?
b. What are the company’s capital structure weights on a market value basis?
c. Which are more relevant, the book or market value weights? Why?
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