Explain what weight should it use for debt

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Reference no: EM131970576

Liu Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.9 percent.

Interest rates have recently increased, and the bonds now have a yield to maturity of 8.5 percent.

If the company has a $45.4 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.) Weight of debt

Reference no: EM131970576

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