Problem:
Erna Corp. has 10 million shares of common stock outstanding. The current share price is $82, and the book value per share is $5. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a coupon of 5 percent, and sells for 97 percent of par. The second issue has a face value of $55 million, has a coupon of 6 percent, and sells for 105 percent of par. The first issue matures in 20 years, the second in 9 years.
Required:
Question 1: What are Erna's capital structure weights on a book value basis?
Question 2: What are Erna's capital structure weights on a market value basis?
Note: Please show how to work it out.