Occam Industrial Machines issued 155,000 zero coupon bonds 4 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.3 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.4 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $82.6 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
Occam Industrial Machines issued 155,000 zero coupon bonds 4 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.3 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.4 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $82.6 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
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 19P
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