Question
You are provided with the following information for the DEF company: The company has debt capital with a face value of 100 per unit. The
You are provided with the following information for the DEF company:
The company has debt capital with a face value of 100 per unit.
The loan stock is currently selling at 106per unit.
Interest payments of 10 per year will be paid for the next 4 years and then the bond will be repaid at the end of four years at 90% of face value.
Calculate the cost of debt capital (ignoring tax and bankruptcy costs) for DEF. You will need to use some trial and error to calculate the cost of debt.
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Applied Equity Analysis and Portfolio Management Tools to Analyze and Manage Your Stock Portfolio
Authors: Robert A.Weigand
1st edition
978-111863091, 1118630912, 978-1118630914
