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

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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

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