A company's cost of debt capital:

Multiple Choice

• Can be observed directly even if the firm's bonds are not publicly traded.
• Can be calculated by looking at the coupon rates on existing bonds of similar risk.
• Can be calculated by estimating the beta of the firm's equity and then using the SML.
• Is the return that the firm's creditors demand for new borrowings.
• Can be estimated by finding the yield on recently-issued bonds with lower bond ratings.