michellemonroe012305
15.11.2019 •
Business
Acompany's pretax cost of debt:
a. is based on the current yield to maturity of the company's outstanding bonds.
b. is equal to the coupon rate on the latest bonds issued by the company.
c. is equivalent to the average current yield on all of a company's outstanding bonds.
d. is based on the original yield to maturity on the latest bonds issued by a company.
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Ответ:
D.
Explanation:
Firstly, we need to keep in mind when it comes to cost of capital (debt or equity) is that it have to be incremental cost. Use bond yield to maturity rather than other yield to estimate cost of debt.
Let go through each of answer option one by one:
a. is based on the current yield to maturity of the company's outstanding bonds. => include both old bonds and recently-issue bonds => not incremental cost => False
b. is equal to the coupon rate on the latest bonds issued by the company. => Coupon rate is not relevant => Fasle
c. is equivalent to the average current yield on all of a company's outstanding bonds. => Current yield is not relevant => Fasle
d. is based on the original yield to maturity on the latest bonds issued by a company. => Meet all requirement => True
Ответ:
it would be $2447.40