Bennington industrial machines issued 136000 zero coupon, Financial Management

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Bennington industrial machines issued 136000 zero coupon

Bennington Industrial Machines issued 136,000 zero coupon bonds five years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.6 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.2 percent.

a) What is the price of the bonds?

b) what is the market value of the company's debt?

c) If the company has a $45.1 million market value of equity, what weight should it use for debt when calculating the cost of capital?

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Financial Management: Bennington industrial machines issued 136000 zero coupon

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Financial Management: Bennington industrial machines issued 136000 zero coupon

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