Question

How do you determine the appropriate cost of debt for a company? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded? How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors?

   How do you determine the appropriate cost of debt for a company? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded? How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors?
 
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Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
Stephen A. Ross;… 11th Edition
Chapter 14, Problem 7 ↓

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Determine the risk-free rate: The first step in estimating the cost of debt is to determine the risk-free rate. This is typically the yield on government bonds with a similar maturity to the company's debt. The risk-free rate represents the minimum return an  Show more…

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How do you determine the appropriate cost of debt for a company? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded? How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors?
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