Cost of Non Current Debt

Yield on Bond

$$,658,750\mathrm{.}00$

Cost of Current Debt

WeightedGiven information: total short term debt $=1098000,$total long term debt $=15009000,$ total interrest paid $6980,000,$ Cost of non current debt $=658,750.$In order to estimate FVW$$s cost of debt, you need to calculate a weighted average of its cost of current debt and its cost of non$-$current debt. The cost of non$-$current debt is just the yield on the on the bond described above, so you need to figure out the cost of current debt. You begin by observing that FVW paid $$698,000$ in interest in $2023.$ When you look at the balance sheet, you note that the only liabilities that charge interest are short$-$term loans $($part of current liabilities$)$ and long$-$term debt $($part of non$-$current liabilities$).$ Since long$-$term debt is the above$-$mentioned bond, if you subtract its annual coupon for $2023$ from the total amount of interest paid during the year, you will obtain the amount of interest FVW paid on its short$-$terms loans. You decide to convert this amount into an interest rate and use it as the cost of current debt. Estimate its overall cost of debt as a weighted average of the costs of its current and non$-$current debt. State the value and explain how you obtained it$.$ Be sure to explain how you derived the weights that were used to calculate the weighted average above.