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?
Value of Zero COupon Bond = Matueity Value * PVF (r%, n)
= $ 2000 * PVF (5.3% , 24)
= $ 2000 * 0.2895
= $ 579.09
Value of Debt = No. of Bonds * Value of Bond
= 140000 * 579.09
= $ 81,073,164.10
Weight of Debt = Value of Debt / [ Value of Debt + Value of Equity ]
= 81073164.10 / [ 81073164.10 + 80200000 ]
= 81073164.10 / 161273164.10
= 0.5027 i.e 50.27%
Weight of Debt 50.27%
Ace Industrial Machines issued 140,000 zero coupon bonds 6 years ago. The bonds originally had 30...
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 115,000 zero coupon bonds 7 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 $76.2 million market value of equity, what weight should it use for debt when calculating the cost of capital?
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Ace Industrial Machines issued 115,000 zero coupon bonds 7 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 $76.2 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 190,000 zero coupon bonds 7 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.6 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 5.7 percent. The bonds have a par value of $2,000. If the company has a $88.2 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 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...
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Ace Industrial Machines issued 100,000 zero coupon bonds 4 years ago. The bonds originally had 30 years to maturity with a yield to maturity of 5.8 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 4.9 percent. The bonds have a par value of $2,000. If the company has a $73.8 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 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...