Question
Liu Industrial Machines issued 151,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of
Liu Industrial Machines issued 151,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.1 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.2 percent.
What is the price of the bonds? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bond price $
What is the market value of the company's debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to 2 decimal places, e.g., 32.16.) Market value $
If the company has a $46.6 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Weight of debt?
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