Occam Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds have a par value of $1,000 and originally had 30 years to maturity with a yield to maturity of 6.9 percent. Interest rates have recently increased, and the bonds now have a yle to maturity of 8.5 percent. Assume semiannual compounding for the bonds. What is the dollar price of the bonds? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Bond price 119.90
Occam Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds have a par value of $1,000 and originally had 30 years to maturity with a yield to maturity of 6.9 percent. Interest rates have recently increased, and the bonds now have a yle to maturity of 8.5 percent. Assume semiannual compounding for the bonds. What is the dollar price of the bonds? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Bond price 119.90
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: accounting
Transcribed Image Text:Occam Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds have a par value of $1,000 and originally
had 30 years to maturity with a yield to maturity of 6.9 percent. Interest rates have recently increased, and the bonds now have a yield
to maturity of 8.5 percent. Assume semiannual compounding for the bonds.
What is the dollar price of the bonds?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Bond price
$
Market value
119.90
What is the market value of the company's debt?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal
places, e.g., 1,234,567.89.
S 62,066,393.00
If the company has a $45.4 million market value of equity, what weight should it use for debt when calculating the cost of capital?
Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.
Weight of debt
0.2685
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