1. Estimate the Marginal Cost of Debt Marginal Cost of Debt: This is an estimate of the interest rate the corporation would have to pay on new borrowing.' Method 1: Try to nd the yield to matuty on your rm's long-term debt. Try google and see what you nd. Method 2: Try to nd your corporation's Standard and Poor's issuer debt rating. Again, try google. Then look on page 205 in your textbook at the table and estimate an appropriate rate. For example, if you nd the rating is "AA'i which would fall between AA and A, you may decide to choose 4.5% {which is between the 4.40 %and 4.62% in the 25year section} Method 3 {optional}: If method 1 and 2 provide nothing, rst double check to make sure your rm has longterm debt, and then follow steps 1 and 2 for a close competitor of your rm, and then make a judgment call on a estimate of Kd for your rm. if the rating is funk [BB, B, and (2012], you have to creatively add a premium to the BBB interest rate. Method 4: Rd = rf + premium