The process for the cost of debt assumes the times interest earned is a good proxy for measuring credit risk, what other financial variables, if any should be considered (is interest coverage the only variable that provides information about ability to pay? Are there other ratios that might help? Can interest coverage be misleading? given it uses EBIT not cash flow?) We adjust the interest coverage ratio assuming the total amount of debt is financed at the cost of debt in the chart (essentially refinancing all of the firms debt) is this realistic? - does this assumption limit the applicability of your results (if so, how)?