Why is the relevant cost of debt the interest rate on new debt, not that on alreadyoutstanding, or old, debt?

Q: Define Long-term debt. Explain the types of Long-term debt.

A:

Q: If short-term interest rates are lower than long-term rates, why might a borrower stillchoose to…

A: Short term interest rate refers to the rates that are charged on a short-term loan or debt amounts.…

Q: What is marginal rate (for debt)?

A: Marginal rate of debt is the rate of interest expected by the investors on their debt instruments…

Q: What are advantages of debt financing?

A: The advantage of debt financing: Ownership remains with the person itself as when the person agrees…

Q: Define the term After-tax cost of debt?

A: Cost of capital is the overall cost of financing the funds from all sources of finance. The cost of…

Q: What evidence is necessary to demonstrate the ability toconsummate the refinancing of short-term…

A:

Q: How does the decision to use debt involve a risk-versus-return trade-off?

A: Risk return trade off: If an investment has high risk, the investors expect more returns from it. If…

Q: Is the relevant cost of debt, when calculating the WACC, theinterest rate on already outstanding…

A: Answer: For some decisions the embedded costs are significant but not for others. For example, when…

Q: Early extinguishment of debt often produces a gain or a loss. How is the gain or loss determined?

A:

Q: How does collection policy influence sales, the collection period, and the bad debtloss percentage?

A: Through the collection policy, an organization is able to identify the various problems associated…

Q: when is stated interest rate of a debt instrument presumed to be fair?

A: Financial instruments are the contract those are traded in the market. the primary financial…

Q: Why What kind of stream of income does a debt security pay for the duration of the security? A fixed…

A: The Answer

Q: Explain the addition to the interest rate, HELOC borrowers consider the issues?

A: Home buyers mostly take loans to buy the home and they will pay the debt in equated installments.…

Q: debt

A: Cost of debt can be defined as the rate of interest which a company incurs on its debts. The cost of…

Q: The additional debt capacity depends on the interest rate and /or maturity term. If the maturity…

A: Debt capacity refers to the entire quantity of debt a commercial enterprise can incur and pay off…

Q: difference between debt and quity

A: A company’s capital consists of two forms, one is equity and the other is debt. When a company is…

Q: Why do we use an after-tax figure for cost of debt but not for cost of equity?

A: Cost of debt is the interest payments a company needs to make for debt financing, whereas cost of…

Q: ________ are long-term debt instrument that promise a fixed income in the form of interest.

A: Debt instrument is a way of financing which can guarantee a fixed income, hence a less risky…

Q: explain the derecognition of debt;

A: Derecognition of debt As bonds are issued, then an entity may leave a bond that is outstanding till…

Q: Explain the differences between domestic debt and external debt.

A: Debt is defined as money borrowed through one party by another. Many businesses and people utilize…

Q: When should a debt security be classified as held-tomaturity?

A: Debt securities: Debt security is money borrowed at a specific rate of interest which must be repaid…

Q: gs or debt) app

A: The explanation is given as,

Q: When is a gain recognized in a debt restructuring?

A: Debt restructuring is a process which the companies are using to avoid the risk of default on…

Q: Explain the classification issues of short-term debt expected to be refinanced.

A: Short term debt: It refers to the financial obligation for the firm that needs to be paid within one…

Q: expense on short term debt should be based on projected balances and short term interest rates.…

A: Basic Concept of accounting

Q: Why does the use of debt lower ROA?

A: Introduction: Debt can be characterised as an amount or sum owned by a person to another for…

Q: State the disadvantages of long-term debt financing.

A: Long term debt refers to the debt that has a maturity period of more than 1 year.They are also…

Q: What is the significance of credit/debt ratings

A: Credit Ratings: Credit Rating is an estimate of the borrower (be it a person, organization, or…

Q: Explain required rate of return on debt

A: Debt is some amount of money owed by a borrower to the creditor. Debt can be two types. One is…

Q: How to calculate the appropriate interest expense based on the amount of outstanding debt using…

A: When the company borrows funds from the people, it has to pay them a certain amount for the borrowed…

Q: Why are claims on income discretionary with equityfinancing but nondiscretionary with debt…

A: Liability: In monetary bookkeeping, a liability is characterized as the future penances of financial…

Q: Why should an investor use debt?

A: Debt investments represent the loan which an investor lends to earn interest along with the…

Q: Explain the nature of long term debt.

A: Nature of long-term debt: Long-term debts are the obligations of the company that are required to…

Q: What are some advantages and disadvantages of short-term versuslong-term debt?

A: Debt is an amount which is borrowed by the firm. When the maturity of debt is up to one year, it is…

Q: Define required rate of return on debt

A: The required rate of return: This rate of return equates to the minimum return an investor would…

Q: What are some differences between debt-with-warrant financing and convertible debt?

A: Following are the differences between debt-with-warrant financing and convertible debt: In basic…

Q: What are the advantages and disadvantages of short-term versus long-term debt asidentified in this…

A: Short term debt: Short term debts are debts or financial commitments that are expected to be settled…

Q: how did you get the yield on debt

A: The yield on Debt: It represents the rate of return expected by the debtholder if the debt…

Q: What are the advantages and disadvantages ofusing short-term debt as a source of financing?

A: Short-term debt: It is a kind of debt that is repaid in a small span of time or within a year. The…

Q: Discuss how a form of debt can be classified as both Current and Long-Term Liabilities.  Why do…

A: Long Term Liabilities are the liabilities that become due for more than one year. They are the…

Q: Are debtors calculated at selling price or finished goods price? and why?

A: The word debtor comes from the word debt which means a company or an individual having a debt…

Q: Describe the method of determining the Cost of Debt?

A: The cost of debt is the profit a business offers its debtors and creditors. These capital suppliers…

Q: What is debt

A: The financial statements of the business includes the income statement and balance sheet of the…