Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Occam Industrial Machines issued 2 2 5 , 0 0 0 zero coupon bonds five years ago. The bonds originally had 3 0 years to

Occam Industrial Machines issued 225,000 zero coupon bonds five years ago. The bonds originally had 30 years to maturity with a yield to maturity of 5.2 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 4.6 percent. The bonds have a par value of $1,000 and semiannual compounding. If the company has a market value of equity of $120 million, 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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions