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    Capital Structure Weights and Selling Security

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    A. suppose taco bells equity is currently selling for $55 per share, with 4 million shares outstanding. Firm also has 7000 bonds outstanding, which are selling at 94 percent of par, what are the firms current capital structure weights?

    b. suppose that taco Bell was considering an active change to their capital structure so as to have a D/E of .4. Which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell?

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    Solution Preview

    a. suppose taco bells equity is currently selling for $55 per share, with 4 million shares outstanding. Firm also has 7000 bonds outstanding, which are selling at 94 percent of par, what are the firms current capital structure weights?

    We first calculate the market values and then the weights
    Market value of equity = Price per share X number ...

    Solution Summary

    The solution explains how to determine the capital structure weights and which security to sell to achieve the desired capital structure. The certain types of securities are determined in order to sell to accomplish a return.

    $2.19

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