Overall cost of capital: Stryder Ltd has 3 million shares outstanding at a current price of $15 per share. The book value of the shares is $10 per share. The company also has $30 million in par value of bonds outstanding. The bonds are selling at a price equal to 101 percent of par. What is the market value of the company?

Question

Quizplus · Accepted Answer

The market value of equity = current price per share x number of shares outstanding = $15 x 3 million = $45 million
The market value of bonds = selling price per bond x par value of bonds outstanding = 101% x $30 million = $30.3 million
Therefore, the total market value of the company = market value of equity + market value of bonds
= $45 million + $30.3 million
= $75.3 million. 
Hence, the correct option is D.

Overall Cost of Capital: Stryder Ltd Has 3 Million Shares