Occam Industrial Machines issued 145,000 zero coupon bonds 7 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.2 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.3 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $81 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. Weight of debt 0.5219

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
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Occam Industrial Machines issued 145,000 zero coupon bonds 7 years ago. The bonds originally had 30 years to maturity with a yield
to maturity of 6.2 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.3 percent. The
bonds have a par value of $2,000 and semiannual compounding. If the company has a $81 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.
Weight of debt
0.5219
Transcribed Image Text:Occam Industrial Machines issued 145,000 zero coupon bonds 7 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.2 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.3 percent. The bonds have a par value of $2,000 and semiannual compounding. If the company has a $81 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. Weight of debt 0.5219
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