*ANSWER IN DETAIL* Dani Corp. has 5.5 million shares of common stock outstanding. The current share price is $83, and th

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*ANSWER IN DETAIL*
Dani Corp. has 5.5 million shares of common stock outstanding.
The current share price is $83,
and the book value per share is $5. The company also has two
bond issues outstanding. The first
bond issue has a face value of $80 million, a coupon rate of
5.5%, and sells for 109% of par. The
second issue has a face value of $45 million, a coupon rate of
5.8%, and sells for 108% of par. The
first issue matures in 21 years, and the second in 6 years. Both
bonds make semi-annual coupon
payments.
a. What are the company’s capital structure weights on a book
value basis? Explain what
percentage of the company’s equity and what percentage of the
company’s debt are paying
for the assets under book value.
b. What are the company’s capital structure weights on a market
value basis? Explain what
percentage of the company’s equity and what percentage of the
company’s debt are paying
for the assets under market value.
c. Which is more relevant — the book or market value weights?
Why?