A financial analyst at your firm notes that the firm's total interest payments this year were $10 million while total debt outstanding was $80 million, and he concludes that the cost of debt was 12.5%. What is wrong with this conclusion? Only long term debt should be used Only current liabilities should be used Excluded taxes will overestimate the cost of debt Excluding taxes will underestimate the cost of debt None of the above are correct
A financial analyst at your firm notes that the firm's total interest payments this year were $10 million while total debt outstanding was $80 million, and he concludes that the cost of debt was 12.5%. What is wrong with this conclusion? Only long term debt should be used Only current liabilities should be used Excluded taxes will overestimate the cost of debt Excluding taxes will underestimate the cost of debt None of the above are correct
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A financial analyst at your firm notes that the firm's total interest payments this year were $10 million while total debt outstanding was $80 million, and he concludes that the cost of debt was 12.5%. What is wrong with this conclusion? Only long term debt should be used
Only current liabilities should be used
Excluded taxes will overestimate the cost of debt
Excluding taxes will underestimate the cost of debt
None of the above are correct
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