Calculating Capital Structure Weights Occam Industrial Machines issued 2 2 5 , 0 0 0 zero coupon
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Question:
Calculating Capital Structure Weights Occam Industrial Machines issued zero coupon bonds five years ago. The bonds originally had years to maturity with a yield to maturity of percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of percent. If the company has a market value of equity of $ million, what weight should it use for debt when calculating the cost of capital? Assume semiannual compounding for the bonds.
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