Use for debt when calculating cost of capital

Assignment Help Financial Management

Reference no: EM131354416

Liu Industrial Machines issued 137,000 zero coupon bonds six years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.7 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.3 percent. If the company has a $45.2 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., 32.1616.)

What is the Weight of debt?

Reference no: EM131354416

Questions Cloud

Statements about the sarbanes-oxley act : Which of the following statements about the Sarbanes-Oxley Act is incorrect? A-Because of the act, the SEC was required to establish a federal oversight board. B-Because the act is complex, compliance is more expensive and time consuming for corporat..

Expected net cash inflows-begin by constructing a time line : A project has an initial cost of $36,850, expected net cash inflows of $13,000 per year for 8 years, and a cost of capital of 10%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Roun..

Reason for the importance of working capital management : Which of the following is NOT a reason for the importance of working capital management? In which of the following organizations would agency problems be least likely to occur?

What amount should the firm finance that month : A firm wants to maintain a $20,000 cash balance. In their worst month of the year, the net change in cash shows that they will be short $42,750, which will be offset by a beginning cash balance of $12,650. What amount should the firm finance that mon..

Use for debt when calculating cost of capital : Liu Industrial Machines issued 137,000 zero coupon bonds six years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.7 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.3 p..

Constant growth valuation-stock current value per share : Constant growth valuation Thomas Brothers is expected to pay a $2.4 per share dividend at the end of the year (that is, D1 = $2.4). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rs, is 14%..

What is the value of the bondholders call option : A 11-year maturity convertible bond with a face value of $1,000 and a 7% coupon on a company with a bond rating of Aaa is selling for $1,190. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is ..

Nonconstant growth valuation-what is firm intrinsic value : Nonconstant growth valuation Hart Enterprises recently paid a dividend, D0, of $2.50. It expects to have nonconstant growth of 25% for 2 years followed by a constant rate of 7% thereafter. The firm's required return is 11%. What is the firm's horizon..

Most directly shorten the cash conversion cycle : Which of the following action would most directly shorten the cash conversion cycle?

User Account

All Pages