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Ace Industrial Machines issued 100,000 zero coupon bonds 4 years ago. The bonds originally had 30 years to maturity with a yield to maturity of
Ace Industrial Machines issued 100,000 zero coupon bonds 4 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 5.8 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 4.9 percent. The bonds have a par value of $2,000. If the company has a $73.8 million market value of equity, what weight should it use for debt when calculating the cost of capital? Assume semiannual compounding.
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