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.
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
Section: Chapter Questions
Problem 1PS
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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.
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