Suppose That a Company's Equity Is Currently Selling for $30

question 110

Multiple Choice

Suppose that a company's equity is currently selling for $30 per share and that there are 5 million shares outstanding. If the firm also has 20 thousand bonds outstanding, which are selling at 98 percent of par ($1,000) , what are the firm's current capital structure weights for equity and debt respectively?

• A) 50 percent, 50 percent
• B) 88.44 percent, 11.56 percent
• C) 99.60 percent, 0.40 percent
• D) 88.23 percent, 11.77 percent

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Definitions:

Negotiable Instrument

A written promise to pay a certain sum of money, which can be demanded or paid at an agreed time, specifying the person responsible for payment in the document.

Holder

An individual or entity that legally owns or possesses a document, instrument, or title.

Authenticating Intent

the process of verifying that the actions or signatures of a person are genuine and intended to validate a legal document or agreement.

Indorsement

The act of signing a document, typically on the back of a negotiable instrument, indicating the legal transfer of its ownership.