Occam Industrial Machines issued 188,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.7 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $89 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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Occam Industrial Machines issued 188,000 zero coupon
bonds 8 years ago. The bonds originally had 30 years to
maturity with a yield to maturity of 6.6 percent. Interest rates
have recently decreased, and the bonds now have a yield to
maturity of 5.7 percent. The bonds have a par value of
$2,000 and semiannual compounding. If the company has a
$89 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
Transcribed Image Text:Occam Industrial Machines issued 188,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.7 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $89 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
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