Use for debt when calculating cost of capital

Assignment Help Financial Management

Reference no: EM131924006

Liu Industrial Machines issued 144,000 zero coupon bonds five years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.4 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.5 percent.

If the company has a $45.9 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 assuming Semi annual

Reference no: EM131924006

Questions Cloud

What would happen to the confidence index : What would happen to the confidence index?

What is effective annual interest rate : A used car dealer advertises financing at 0% interest over 3 years with monthly payments. What is your effective annual interest rate?

Find the size of each payment : Assuming that the rate of interest is 8% and that if once default occurs, no further payments will be made, find the size of each payment.

Under the percentage of sales forecasting method : Under the percentage of sales forecasting method, which of the following increases by the same proportion that sales increases:

Use for debt when calculating cost of capital : If the company has a $45.9 million market value of equity, what weight should it use for debt when calculating the cost of capital?

Create graph to plot the total cost of each option : Create a graph to plot the total cost of each option and show the crossover point.

Compare required return on the stock calculated using CAPM : Compare the required return on the stock calculated using CAPM against it's historical return over the last 52 weeks,

Calculate the monthly mortgage payments on a PITI basis : Ben and Marie Gerrard, both in their mid-20s, Calculate monthly mortgage payments on PITI basis. Would they qualify for loan using 27% affordability ratio?

Constant-growth dividend discount model : what is the required return applicable to the investment based on the constant-growth dividend discount model (DDM)?

User Account

All Pages