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Cost of Debt

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1. Describe how a company would determine its cost of debt if it does not have publicly traded bonds.

2. Where do readers ordinarily expect to find conclusions and recommendations in a financial report?

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The expert describes how a company would determine its cost of debt if it does not have publicly traded bonds. Where readers ordinarily expect to find conclusions and recommendations in a financial report are determined.

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1. Describe how a company would determine its cost of debt if it does not have publicly traded bonds.

To find the cost of debt, we need tow data - the market value of the debt and the interest date. One common form of debt is a bond which is traded in the market. The market value of the bond will fluctuate depending on the market rate of interest and the coupon value of the bond.

When the debt is not traded in the market, we have to take the amount of borrowing and the yield to maturity of the bond. For example, if a bond is issued at 90, it means that the interest will be paid on the face value of $1000 but the bond will be redeemed at $900 on maturity. The yield to ...

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