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Calculating the cost of capital

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Ace Industrial Machines issued 145,000 zero coupon bonds 7 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 $81 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)

Reference no: EM132680582

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