Problemdeville industrial machines issued 154000 zero, Ask an Expert

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Problem:

DeVille Industrial Machines issued 154,000 zero coupon bonds seven years ago. The bonds originally had 30 years to maturity with a 7.4 percent yield to maturity. Interest rates have recently increased, and the bonds now have an 8.5 percent yield to maturity.

Required:

Question: If the company has a $46.9 million market value of equity, what weight should it use for debt when calculating the cost of capital?

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166221

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