Question: Problem 12-18 Calculating Capital Structure Weights [ LO3] Occam Industrial Machines issued 143,000 zero coupon bonds four years ago. The bonds have a par value
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Problem 12-18 Calculating Capital Structure Weights [ LO3] Occam Industrial Machines issued 143,000 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 7.3 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.4 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 $45.8 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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