You now need to calculate Spirent’s cost of debt. There are several ways to do this, all of which are broad approximations. One approach is to use the information on Spirent’s bonds to find the weighted average cost of debt using the book value weights. Try and find bond prices for Spirent’s debt. Does it make a difference in this case if you use book value weights or market value weights?

Explain. If you have no bond information you could take Spirent’s most recent year’s interest expense and divide it by the average of the last 2 years’ debt values. This gives a very rough estimate of the company’s cost of debt.