Use for debt when calculating the cost of capital

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Reference no: EM131915709

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?

Reference no: EM131915709

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