Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
G4X Inc. is a publicly traded company with 25 million shares outstanding. The stock last traded at $10 a
share and has a levered beta of 1.4. G4X Inc. has a $25 million bond outstanding on which it makes $1
million interest only payments each year with 5 years left to maturity. In addition, G4X Inc. has operating
leases with required lease payments of $2 million a year for the next five years. Moody's rates the bond
Baa which has a current default spread of 1.5%. The current marginal tax rate is 37%. The current risk-free
rate is 2.0%, and the current equity risk premium is 6.0%. What is the current cost of capital for G4X Inc.?
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