A-6 Problem 12-18 Calculating Capital Structure Weights [LO 3]

Occam Industrial Machines issued 149,000 zero coupon bonds six years ago. The bonds have a par value of $1,000 and originally had 30 years to maturity with a yield to maturity of 7.4 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.5 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

BOND PRICE=

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.

MARKET VALUE=

If the company has a $46.4 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 DEBT=