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?