It is probably easier to estimate the cost of equity than it is to estimate the cost of debt.

True

False

Expert Solution

FALSE

The cost of debt is easier to estimate then the cost of equity.

The bond is defined by its features such as the Face Value, coupon rate, and term to maturity. Given all of these and the market price of the bond, one can easily calculate the yield to maturity. The yield to maturity is nothing but the cost of debt.

On the other hand, it is very difficult to estimate the cost of debt. There are many factors that need to be considered such as the market risk premium, risk premium for investing in small cap companies, country risk premium etc.

jeff jeffy answered 2 years ago

It is probably easier to estimate the cost of equity than it is to estimate the cost of debt.

It is probably easier to estimate the cost of equity than it is to estimate the cost of debt.True False

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4. Cost of debt versus cost of equity. Because the cost of debt is lower than...

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“The cost of equity can never be cheaper than the cost of debt considering an equity...

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Why would equity cost more than debt?

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Generally speaking, the cost of debt is cheaper than the cost of equity. Does it imply...

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Give the data: Cost of equity: 5% Cost of debt: 7% %debt: 60% %Equity: 40% what is the weighted average cost of capital of this company? A: 3.7% B: 5.9% C: 6.2% D: 4.0%

Debt is typically lower cost than equity. However, what are some advantages to increasing WACC and...

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Restex has a debt-equity ratio of 0.76, an equity cost of capital of 18 %, and a debt cost of capital of 9 %.

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It is probably easier to estimate the cost of equity than it is to estimate the cost of debt.

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It is probably easier to estimate the cost of equity than it is to estimate the cost of debt.

the cost of common equity financing is more difficult to estimate than the costs of debt...

4. Cost of debt versus cost of equity. Because the cost of debt is lower than...

“The cost of equity can never be cheaper than the cost of debt considering an equity...

Why would equity cost more than debt?

A) If the cost of debt is typically significantly less than the cost of equity (especially...

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Give the data: Cost of equity: 5% Cost of debt: 7% %debt: 60% %Equity: 40% what...

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Restex has a debt-equity ratio of 0.76, an equity cost of capital of 18 %, and a debt cost of capital of 9 %.