Question
Occam Industrial Machines issued 151,000 zero coupon bonds four years ago. The bonds have a par value of $1,000 and originally had 30 years to
Occam Industrial Machines issued 151,000 zero coupon bonds four years ago. The bonds have a par value of $1,000 and 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. Assume semiannual compounding for the bonds.
What is the dollar price of the bonds?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
What is the market value of the company's debt?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.
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?
Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.
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