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An originally un-levered firm issued 5 year fixed-coupon bonds one year ago. The bonds' yield to maturity and coupon rate remain unchanged since last year.
An originally un-levered firm issued 5 year fixed-coupon bonds one year ago. The bonds' yield to maturity and coupon rate remain unchanged since last year. The bonds are rated BBB+ by Standard and Poors and Baal by Moodys. The yield curve is currently flat, unchanged since last year. Which of the following statements about the firm's cost of debt is NOT correct? The firm's cost of debt (before tax) can be calculated by finding: Select one: o a. The firm's interest expense over the past year (from income statement) divided by the bonds' market capitalisation (from balance sheet) one year ago o b. The bonds' yield to maturity based on the traded market price, coupons and face value. c. An average of similarly levered firms' interest expense over the past year divided by their debt market cap one year ago. d. An average of similarly levered firms' senior bonds' yields to maturity, where the similar firms issued senior bonds and junior loans. e. An average of similarly rated bonds' yields to maturity
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