Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pls answer as best you can, I really need help Given information: total short term debt 1098000, total long term debt 15009000, total interrest paid

Pls answer as best you can, I really need help
image text in transcribed

Given 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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

13th edition

978-1-119-4110, 1119411483, 9781119411017, 978-1119411482

Students also viewed these Finance questions