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- 6. What is the difference between yield to maturity on outstanding debt and coupon rate? Which is a better measure of cost of debt between the two? 7. How is COST OF preferred equity computed?If a firm’s ROE is low and management wants to improve it, explain how using more debtmight help.The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity. true or false explain
- Choose option a,b,c,d,e for the following: Question 6 - A higher financial risk: a. Arises when the debt – equity ratio is reduced. b. Can avert financial distress. c. Will cause the shareholders to expect lesser return. d. Indicates an inefficient use of fixed cost assets. e. Indicates an inefficient use of fixed cost funds.Debt allows an economy to appear very large but debt also creates more ____ in an economy. Inevitability Surety Certainty Risk Business4. Explain or illustrate before-tax cost of debt and after-tax cost of debt. 5. What are the relationships between: a) interest rate and cost of debt; b) default risk and cost of debt; and c) bond rates and interest rates? 6. What is the difference between yield to maturity on outstanding debt and coupon rate? Which is a better measure of cost of debt between the two? 7. How is COST OF preferred equity computed?
- 3. If interest rates rise, prices of short-term bonds will decline less than long-term bonds. Is this true or false? Why?Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity? Start a New ThreadThe cost of debt is normally higher than the cost of equity. Is it a good idea to always carry a debt load as great as possible so that ROE will be higher. Do you agree? Why or why not?
- it say all answers above are incorrect, i need the yield on the debt percentage plz and thank uEquity is ________________ (more/less) risky than debt since equity holders receive a ________________?Which of the following statements are CORRECT? Check all that apply: The aftertax cost of debt decreases when the market price of a bond increases. A decrease in a firm's WACC will increase the attractiveness of the firm's investment options. Cost of capital is also known as the minimum expected or required return an investment must offer to be attractive.