标题: Cost of debt??? [打印本页] 作者: dvilayphet 时间: 2011-7-13 15:20 标题: Cost of debt???
When calculating WACC, which one do you take as before tax cost of debt:
1/ YTM of firm's long-term debt
2/ Coupon rate on firm's current long-term debt
3/ YTM of firm's short-term debt
4/ Coupon rate on firm's current short-term debt
5/ Expected YTM of bond if firm is to issue more bond
That's all I can think of right now. Is there a priority principle for this thing?作者: SeanWest 时间: 2011-7-13 15:20
I would use #5 myself. Can't give any proof though- I just seem to remember we use the marginal cost of debt, which is the cost of new debt.作者: spreads 时间: 2011-7-13 15:20
#5 makes sense. Ke is an investors required return on equity and the ytm is, definitely for future debt, the required rate of return (Kd) of a bond holder.作者: Newhuman 时间: 2011-7-13 15:20
If they don't give #5, which then would you guys use?作者: MiniMe7 时间: 2011-7-13 15:20
I would try to sync up the time to maturity. If it's a long term project, use long term debt.
Again, it would be nice if someone could definitely say for sure.作者: eoin 时间: 2011-7-13 15:20
There's definitely a pecking order to the choice if you are not given K(d) from the get go.
1. I would first use the YTM on future issues (Like we said above)
2. YTM on most recent issue
3. If given S/T Debt & L/T Debt and int I would calculate the weightings of each portion of debt and then multiply that by the firm's int pmt.
4. YTM on S/T Debt
I think you would use the coupon pmts as a last resort. This is from the top of my head so let me check my notes.作者: kickthatcfa 时间: 2011-7-13 15:20
Straight from CFAI "The before tax required return on debt is typically estimated using the expected YTM of the company's debt based on current market values"
Not much clarity but I would stick with 1, 2, and 3 in that order. Google didn't help much either. Apparently the cost of debt is loosely defined.作者: iteracom 时间: 2011-7-13 15:20
Well the fact that it's loosely defined is rather comforting- it means they'll have be more specific about it.
