Use for debt when calculating cost of capital

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Reference no: EM131558508

Liu Industrial Machines issued 150,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.1 percent.

If the company has a $46.5 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: EM131558508

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