Zero-coupon bonds have semi-annual compounding.
PV of zero-coupon bond = Par Value / [1 + r]n
= $2,000 / [1 + (0.055/2)][(30-8)*2]
= $2,000 / 3.2991 = $606.22
Market Value of debt = No. of zero-coupon bonds * PV of zero-coupon bonds
= 175,000 * $606.22 = $106,088,302.50
Weight of Debt = Market Value of Debt / [Market Value of debt + Market Value of Equity]
= $106,088,302.50 / [$106,088,302.50 + $85,800,000]
= $106,088,302.50 / $191,888,302.50 = 0.5529
Ace Industrial Machines issued 175,000 zero coupon bonds 8 years ago. The bonds originally had 30...
Ace Industrial Machines issued 175,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.4 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.5 percent. The bonds have a par value of $2,000. If the company has a $85.8 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 170,000 zero coupon bonds 7 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.4 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.5 percent. The bonds have a par value of $2,000. If the company has a $85 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 185,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.5 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.6 percent. The bonds have a par value of $2,000. If the company has a $87.4 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 185,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.5 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.6 percent. The bonds have a par value of $2,000. If the company has a $87.4 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 120,000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.1 percent. The bonds have a par value of $2,000. If the company has a $77 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 120.000 zero coupon bonds 8 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.1 percent. The bonds have a par value of $2,000. If the company has a $77 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 140,000 zero coupon bonds 6 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. If the company has a $80.2 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
Ace Industrial Machines issued 160,000 zero coupon bonds 5 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.3 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.4 percent. The bonds have a par value of $2,000. If the company has a $83.4 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...
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Ace Industrial Machines issued 125,000 zero coupon bonds 9 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.1 percent. The bonds have a par value of $2,000. If the company has a $77.8 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate...